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- Lower Interest Rates in SA | Trump Tariffs
Lower Interest Rates in SA | Trump Tariffs
Ninety One’s Jeremy Gardiner Taking Stock
Jurie de Kock
August 08, 2025
Lower Interest Rates in SA
The SA Reserve Bank's (SARB) Monetary Policy Committee cut interest rates last Thursday, leaving the repo rate now at 7%. This was widely expected, given the inflation outlook.
Lower inflation and interest rates are net positive for investments and risk assets of shares, property and bonds, and therefore we keep a close eye here.
The accompanying commentary by the SARB when cutting SA interest rates last week was that they will, in future, be targeting inflation to be closer to 3% per annum, with the bottom of the 3-6% per annum range being the targeted band currently in use.
In their commentary, the SARB commented:
“Over the past few months, the prospect of a lower inflation target has bolstered the rand and lowered long-term borrowing costs. It is important to sustain this progress and to minimise uncertainty about the longer-term objectives of monetary policy.
Therefore, the MPC now prefers inflation to settle at 3%. In line with this, we have decided to aim for the bottom of our inflation target range, of 3-6%. We welcome the recent moderation in inflation expectations and would like to see expectations fall further. This would expand policy space and make our framework more robust to shocks. We will use forecasts with a 3% inflation anchor at future meetings. The South African Reserve Bank will also continue working with the National Treasury to complete target reform and achieve permanently low inflation."
The SARB Reserve Bank governor quickly thereafter stated to clarify that his comments are not the official statement and implementation, but that this will have to be ratified by the various supporting government bodies. (The market view is that this commentary and statement is not “yet”, and will be ratified by all related bodies shortly).
Where many previously thought we would now see interest rates in SA being put on hold after last week’s cut, this stated intent means that our SA interest rates are now likely to be cut by a further 1,5% (in 0,25% increments) over the next year or so, in this interest rate cycle.
Weaker US job-data results coming out of the US late last Friday, has simultaneously increased expectations for interest rate cuts in the US, with US Markets now seeing a 94% probability that we will see an interest rate cut in the US next month, followed by two more interest rate cuts of 0,25% over the remainder of this year. Yesterday, we also saw a further interest rate cut in the UK.
This all further supports further interest rate cuts in SA.
There will always be inflation cycles, but structurally lower long-term inflation will benefit the South African economy and also support a rerating in its financial markets.
This latest update now shows that our real interest rates remain among the highest in the world, leaving much room for further interest rate cuts.
On the back of a lower inflation and interest rate environment, notwithstanding the Trump tariffs as I comment below, share markets both globally and locally in SA have increased neatly again this week.
Trump Tariffs
The new reciprocal tariffs were finalised last Friday, and these certainly were not the big shock as in April, even though the tariff levels are not too dissimilar.
At the same time, we don't believe this is the end of the matter by any means; at least now, there is a degree of certainty. And Investment markets like certainty. Negotiations will continue, but the outcome will be country by country, instead of across-the-board shotgun style.
Most of the US's largest trading partners are now covered by some sort of "deal" without retaliation. China talks are ongoing. This reduces the risk of an all-out trade war.
For the smaller trading partners, the situation is asymmetric. They need the US more than the US needs them. Some are lucky in this latest round. Lesotho's tariff drops from 50% to 15%, and Bangladesh is happy with "only" 20%. Others, like Laos or Bosnia, are unlucky for no apparent reason.
South Africa's 30% tariff presents a headwind for specific sectors, but not all. We expect negotiations to continue, but we also need to take further steps to improve the overall business climate in the country. South African exporters mostly don't compete with American businesses in the US market; they compete with other countries.
Much depends on the tariffs imposed on our competitors. Most commodity exports - gold, coal, PGMs, which comprise 60% of our exports to the US - remain exempt.
The Reserve Bank's growth forecasts already incorporated 30% tariffs when it cut interest rates last week. Still, Treasury will have to do the same in the upcoming Mini-Budget Policy Speech MTBPS.
Though companies in some countries will cut prices to maintain US market share, the burden will mostly fall on US importers and consumers.
Hywel George on Markets, including China and Trade Tariffs
Last Thursday, Hywel George, as Director of Investments at OMIG, having a broader overview of markets, shared his thoughts and views from a global perspective, which you can view by clicking on this link below;
In addition to the background, from minute 39 in his summation, he neatly explains the ideal portfolio positioning, including offshore exposures outside the US, and allocating to Europe and Emerging Markets, which is exactly as we have in our client portfolios.
Ninety One’s Jeremy Gardiner Taking Stock
Ninety One’s Director of Investments, Jeremy Gardiner, yesterday shared his thoughts on global and SA investments, and covers many questions investors have, including a weaker $US dollar, the impact of Trade Tariffs on SA, local politics, SA’s grey-listing being lifted, and our growth prospects.
To view, simply click on the link below;
He ends on a light note, reminding us that SA is the first country to ever simultaneously be the Test Cricket and Rugby world champions.
Old Mutual SMEgo’s R4.2m Pitchathiveafor SMEs
Old Mutual has launched the second edition of its SMEgo Pitchathon, a competition offering a R4.2 million prize pool to empower small and medium enterprises (SMEs) in South Africa’s information, communications and technology (ICT) and financial services sectors.
Fourteen businesses stand to receive R300 000 each to help them on their growth journey.
“The purpose of Pitchathon is to address the critical funding gap faced by SMEs, which employ 80.5% of South Africa’s workforce, yet all the research shows that they struggle to access finance,” says Nobesuthu Ndlovu, SME director at Old Mutual.
“This is our second year doing Pitchathon, and we were delighted with the quality of businesses we attracted last year. This year, we want to attract even more businesses and help them in their development by providing critical funding.”
It’s also an opportunity to showcase Old Mutual’s SMEgo, a digital platform for small businesses that allows them to manage their finances, payroll and legal compliance, while offering them access to a vast marketplace for their products, as well as multiple financing options.
For the full details, qualifying criteria and entry process, you can click on this Moneyweb link;
PWM | 25 Years of Purpose
