Neelam Rahim | neelam@radioislam.co.za
3-minute read
19 September 2025 | 10:35 CAT

📸 Economist Rashaad Amra unpacks how the Reserve Bank’s decision to keep interest rates unchanged leaves South Africans grappling with high borrowing costs, unemployment, and global economic pressures.

The South African Reserve Bank’s Monetary Policy Committee (MPC) announced yesterday that it would maintain the repo rate at 7%, with the prime lending rate remaining at 10.5%. The decision surprised many economists and market watchers who expected a rate cut in line with other countries easing borrowing costs to stimulate sluggish growth.

On the ASRI Report, Economist Rashaad Amra unpacked the implications for ordinary South Africans. He explained that while inflation has eased to 3.3% driven by slow global and domestic growth and a weaker dollar, the central bank’s cautious stance means no relief for households burdened by expensive loans. “If you have a home loan, if you finance your vehicle, even if you have a credit card, it means there’s no relief. It’s a continuation of that pain of high interest rates,” Amra said.

The Reserve Bank’s decision is rooted in inflation expectations, which are how businesses, workers, and consumers anticipate future prices. “If we have a shop, or if you’re engaging in a wage negotiation with your boss, you might want a 5% or 7% increase. Those expectations are a significant determinant of actual inflation,” Amra explained. But he cautioned that while the Bank is conservative and cautious, South Africa could benefit from stimulus through lower borrowing costs to boost growth.

Growth numbers have shown some modest improvement. The economy grew by 0.8% in the second quarter compared to the first quarter, and by 0.6% compared to the same period last year. While this momentum is encouraging, Amra stressed that the key challenge is unemployment. “We have unemployed numbers at 16.8 million. The official unemployment rate is 33%, and the broad rat counting discouraged job seekers is 43%. That’s mind-blowing,” he noted. For Amra, true recovery lies not in rising corporate profits but in livelihoods: “Our indicator should be how the average African is doing, rather than whether some of us can afford another Umrah or an X5.”

The rand, meanwhile, remains highly vulnerable to international shocks. As one of the most traded currencies in the world, it often fluctuates not because of South African trade but due to global investor sentiment and financial speculation. “The rand is a proxy for emerging markets,” Amra explained. “When it weakens, we see immediate knock-on effects higher petrol prices, more expensive food, and a general rise in living costs.”

Structural challenges further weigh on growth. Amra pointed to load-shedding and transport bottlenecks as long-standing policy failures. While the appointment of Kgosientsho Ramokgopa as energy minister has seen significant improvements in energy supply, with only two cumulative weeks of load-shedding in 20 months, the legacy of inaction remains damaging. “If this was done 10 years ago, you’d have seen more investment, growth, and job creation,” Amra said. He also noted small wins, such as the Durban fuel hub lease and steps toward private sector access to rail, but emphasised that these remain insufficient for a meaningful recovery.

Globally, South Africa faces additional pressures from rising borrowing costs, geopolitical tensions, and the transition to green energy. Amra cautioned that while international donors push for decarbonisation, South Africa must set its own priorities. “We need to look at the short-term impact on jobs and investment. There’s a sequencing in terms of priorities,” he argued. Trade wars between the US and China, as well as uncertainty around AGOA and access to US markets, further threaten the country’s economic stability.

Amra concluded that South Africa’s path forward requires striking a balance between global realities and domestic resilience. “We’ve de-industrialised and become dependent on global markets. The next chapter will have to be written in turbulent times, and that means focusing on re-industrialisation, job creation, and policies that strengthen our own capacity.”

Listen to the full ASRI Report on Sabahul Muslim with Moualan Sulaimaan Ravat and Rashaad Amra.