The South African Reserve Bank’s Monetary Policy Committee (MPC) voted unanimously on 23 September 2026 to raise the repo rate by 25 basis points to 7.25%, and one economist says the hike will hit households that are already squeezed by fuel, electricity and municipal costs. The change takes the prime lending rate, the benchmark for most consumer loans, to 10.75%, a level not seen since June 2025, BusinessTech reported.
## The critique of the decision
Aluma Capital chief economist Frederick Mitchell argues in a BusinessTech opinion piece that the decision is misguided for South Africa’s economy. That is his view, not the Reserve Bank’s. His case is that most of the country’s inflation pressure comes from abroad, through global energy prices, and that a higher repo rate cannot fix it. “Higher interest rates cannot influence the international Brent crude price benchmark, untangle global supply bottlenecks, or resolve domestic logistical constraints,” he writes.
The Bank sees it differently. Governor Lesetja Kganyago said the inflation outlook faced upside risks as fuel-price shocks intensified and global interest rates moved higher, according to the government news agency’s report on the decision. Inflation was 4.4%, against a target of 3%. The Bank cut its 2026 growth forecast to 1.2% from 1.4% and said it expects inflation to return towards target around the end of 2027. It was the second increase of the year, following a rise to 7.0% in May.
## Fuel is the next pressure point
Mitchell notes that fuel prices are set to climb again. Data from the Central Energy Fund pointed on 22 September to October increases of R2.83 a litre for 95 unleaded petrol and between R2.60 and R3.01 for diesel, according to IOL. That would put 95 petrol at about R28.88 a litre at the coast and R29.75 in Gauteng, close to R30. The pressure comes from Brent crude, which touched $108 a barrel in the week before the report after Middle East tensions, and has since eased to about $101.
September had already brought steep adjustments: both petrol grades rose R1.34 a litre and diesel R2.94 to R3.15. Fuel is priced in dollars, so a higher local interest rate does not change what South Africa pays for it. The official October adjustment is due from the Department of Mineral and Petroleum Resources on 7 October 2026.
## What it costs borrowers and investors
Mitchell says households are also carrying municipal fee increases and rising electricity costs, which the higher repo rate does nothing to reduce, while it raises the cost of servicing a bond, vehicle finance or a credit card. He gives no percentages for the municipal and electricity increases.
The arithmetic for borrowers is straightforward. A 25 basis point rise adds about R104 a month in interest on a R500 000 overdraft priced at prime. On a 20-year home loan, our calculation puts the extra repayment at about R170 a month per R1 million borrowed and about R254 on R1.5 million, assuming the bank passes the full rise on. Our report on the decision covers the Bank’s reasoning in more detail.
For business, Mitchell points to fixed capital investment, which stands at about 14% to 15% of GDP, against a target of 30% in the National Development Plan. Higher financing costs, he argues, discourage companies from investing in new equipment and expansion. The South African Reserve Bank publishes the full MPC statement, and our Markets & Finance and Energy & Infrastructure sections follow the fuel and rate decisions as they land.
## A practical check for small businesses
A business with facilities linked to prime should list them and work out what a quarter of a percentage point adds to each monthly repayment, then ask its bank whether any of the debt can be fixed or restructured. Expansion plans should be tested against the new cost of finance, since the return a project must earn rises with the interest rate.
