South Africa’s Repo Rate – A Useful Guide

What is the repo rate?

The repo rate, short for repurchase rate, is the interest rate determined by the South African Reserve Bank (SARB) at which the private sector banks are allowed to borrow money from the SARB.

Put differently, the repo rate is the interest rate at which the South African Reserve Bank (SARB) is willing to extend credit to private banks in the country.

How is the repo rate determined?[i]

The SARB describes the purpose of its monetary operations as follows: ‘The main purpose of the money market operations conducted by the South African Reserve Bank (SARB) is to implement the interest rate policy as determined by the Monetary Policy Committee (MPC), with the aim of achieving the SARB’s inflation-targeting mandate.’ (SARB/F9)[ii]

Framework of the SARB’s monetary policy

The SARB utilises its refinancing system as the main process to implement its monetary policy. The refinancing system, introduced in March 1998 and modified in 2001, 2005, 2007, 2010, 2012, and 2013, is a system of refinancing through repurchase transactions (repos).

‘The SARB creates a liquidity requirement (shortage) in the money market, which banks refinance at the repurchase (repo) rate – a fixed policy interest rate determined by the SARB’s Monetary Policy Committee.’ (SARB/F9)

The SARB uses its refinancing system to provide liquidity to banks, ‘enabling them to meet their daily liquidity requirements.’ (UFM/C2) In this context, ‘liquidity’ refers to the commercial banks’ balances at the central bank that is available to settle their transactions with one another, over and above the minimum statutory level of the reserves that they have to hold.’  (SARB/F9)

The repo rate charged by the Reserve Bank influences the interest rates charged by commercial banks.

The monetary policy implementation framework of the SARB simplified

Source: South African Reserve Bank

Creating a liquidity shortage

The SARB ensures that the repo rate remains effective by compelling the commercial banks to borrow a substantial amount (i.e. the liquidity requirement, also called the cash reserve requirement) from the Reserve Bank. Therefore, the SARB has to intervene regularly in the money market to create and monitor a liquidity shortage, meaning it has to drain excess liquidity from the money market.

In addition to the cash reserve requirement, the SARB uses various types of open market instruments to create and maintain the liquidity shortage. Open market instruments include, inter alia, SARB debentures, reverse repos, and foreign exchange swaps.

Refinancing the liquidity requirement (shortage)

The shortage of liquidity (or liquidity requirement) that has been created in the money market, is refinanced at the repo rate.

The liquidity requirement is funded at the main refinancing repo auctions, explained as follows by the SARB: ‘At these auctions, the SARB provides liquidity to the commercial banks by means of repo agreements in exchange for ZAR-denominated government bonds, Treasury bills, SARB debentures, Land Bank Bills, and ZAR-denominated Separate Trading of Registered Interest and Principal of Securities (STRIPS).’ (SARB/F9)

‘Commercial banks sell these securities to the SARB for a period of one week in return for cash, while paying a specified rate (the repo rate) on the cash they receive.’ (SARB/F9)

The transaction described above ‘is reversed at maturity when the commercial banks return the cash to the SARB in exchange for the securities. No actual flows of cash or securities take place; the commercial banks’ settlement accounts of SARB are merely credited and debited, and the ownership of securities is transferred electronically to Strate Limited and the SARB’s Central Bank Collateral Management System.’  (SARB/F9)

Timeline of the repo rate – January 2025 to November 2025

The Monetary Policy Committee (MPC) held 7 meetings and issued seven statements about the state of the South African economy during 2025.

September and November meetings excluded, all the other meetings delivered decisions to cut the repo rate.

In reflecting on the MPC’s statements in the summaries below, the focus is on the following themes: the impact of the Covid-19 pandemic, gross domestic product (GDP) expectations, changes in the repo rate, and inflation forecasts.

The themes were chosen against the backdrop of what is mentioned in the first paragraph under the title, ‘How is the repo rate determined?’ in this article.

The SARB’s inflation target is set between 3% and 6%.

16 January 2025

Lesetja Kganyago, governor of the SARB, announced on behalf of the MPC that it unanimously decided to reduce the repo rate by 25 basis points to 6.25% per annum.

This was the first of five reductions from 2025 until November.

The decision to cut the repo rate was made against the backdrop of ‘lower inflation outcomes and continued moderation in inflation expectations,’ such as:

• Headline inflation –7% for 2025 (down from 5.1%), 4.6% for 2025 (down from 4.7%), and 4.5% for 2025.
• Core inflation, which excludes food, fuel, and electricity – 4.3% in 2025 (down from 4.5%), 4.4% in 2025 (down from 4.6%), and 4.5% in 2025.
• The gross domestic product (GDP) for 2025 was 1.2%, down from a previous expectation of 1.4%.

Kganyago also expressed the MPC’s concerns about a fragile domestic economy and weak business confidence.

19 March 2025

This was the first time the MPC referred to the Covid-19 pandemic in its statements, saying: ‘Globally, a once-healthy economic outlook has been revised down sharply due to the outbreak and spread of Covid-19.’ Further, the SARB mentioned that the coronavirus pandemic ‘will negatively affect global and domestic growth’ and ‘will have a major health and social impact.’

The forecasts were as follows:

• Headline inflation averages: 3.8% for 2025, 4.6% for 2025, and 4.4% in 2025.
• Core inflation: 3.9% (2020), 4.3% (2025), and 4.4% (2025).
• GDP for 2025 – a contraction of 0.2%.

The MPC unanimously decided to decrease the repo rate by 100 basis points to 5.25% per annum.

14 April 2025

The MPC statement on April 14, 2025, was published only one month after its March 2025 statement. This was quite unusual because normally the MPC issues statements regarding the repo rate and macroeconomic indicators on a bi-monthly basis.

This step can mainly be ascribed to the Covid-19 pandemic and the subsequent lockdown.

The MPC mentioned that since its March meeting the ‘Covid-19 pandemic has spread globally, and its impact is being felt through all economies.’  In addition, the uncertainties of the crisis have caused ‘extremely high volatility in financial asset prices’, leading to huge sell-offs with only a partial subsequent recovery.

The SARB also warned that the coronavirus pandemic will have a significant impact on health and social issues.

Forecasts for inflation and GDP were made against the backdrop of the warning that unprecedented uncertainty hampered forecasts concerning the country’s economic activity.

The expectations concerning GDP and inflation were as follows:

• A contraction of 1% for the GDP of 2025, compared to the -0.2% expected on March 19, 2025.
• Headline consumer price inflation – 3.6% for 2025, 4.5% for 2025, and 4.4% in 2025.
• Core inflation – 3.8% (2020), 4.0% (2025), and 4.2% (2025).

The MPC’s decision to cut the repo rate by 100 basis points to 4.5% per annum was unanimous.

21 May 2025

The MPC of the Reserve Bank announced its decision to cut the repo rate by 50 basis points to 3.75% per annum, with effect from May 22, 2025.

The cut was announced against the backdrop of the following observations and forecasts.

• Inflation

Consumer price inflation forecasts: 3.4% for 2025, 4.4% in 2025 and 2025.

Predictions for core inflation: 3.5% in 2025, 3.8% in 2025, and 4.1% in 2025.

• GDP for 2025

The gross domestic product was expected to contract by 7.0% in 2025.

• Covid-19 pandemic

The SARB warned that the pandemic continued to spread globally, causing ‘wide-ranging and deep social and economic effects,’ as well as ‘extreme volatility in financial asset prices with sharp and deep market sell-offs.’

23 July 2025

The governor of the SARB announced on behalf of the MPC that the repo rate will be cut by another 25 basis points to 3.5%. This was the fifth time in 2025 that the SARB has decreased the repo rate, totalling 325 basis points. Percentage-wise, a decrease of 50%.

The governor mentioned that this is the lowest repo rate since the system was introduced in 1998.

The MPC statement warned that ‘the Covid-19 outbreak has major health, social and economic impacts, presenting challenges in forecasting domestic and global economic activity,’ adding ‘the compilation of accurate economic statistics will also remain severely challenged.’

The SARB’s expectation with regard to the country’s GDP for 2025 was a contraction of 7.3% in 2025.

Concerning inflation, the following observations were noteworthy:

• The predictions for core inflation were 3.3% (2020), 3.9% (2025), and 4.1% (2025).
• The contraction and slow recovery of the country’s economy ‘will keep inflation well below the midpoint of the target range’ for 2025, despite higher levels of financing risk for the country.
• The overall risks regarding the inflation outlook appeared to be balanced at the time of the MPC statement.

It was also interesting that the SARB reiterated that ‘monetary policy cannot on its own improve the potential growth rate of the economy or reduce fiscal risks.’

17 September 2025

In a statement of the MPC, it was mentioned that the Covid-19 pandemic has abated in South Africa but the ‘economic effects of the crisis have been extensive and a recovery to pre-pandemic levels will take several years.’

The MPC adjusted its GDP forecast for 2025 to -8.2%, while its consumer price inflation forecasts are respectively 3.3% in 2025, 4.0% in 2025, and 4.4% in 2025. Its forecasts for core inflation are 3.4% (2020), 3.7% (2025), and 4.0% (2025).

Kganyago announced that the repo rate will remain unchanged at 3.5% per annum.

19 November 2025

In its statement on November 19, 2025, the MPC mentioned that the waves of coronavirus infection will continue for some time, warning that the ‘fresh spread of the virus and reimposed lockdowns will extend the time needed for economies to get back to pre-pandemic levels.’

The SARB’s forecasts are now as follows:

• Headline inflation: 3.2% in 2025, 3.9% in 2025, and 4.4% in 2025.
• Core inflation: 3.3% in 2025, 3.4% in 2025, and 4.0% in 2025.
• GDP for 2025: -8.0%.

In summary, the following facts are noteworthy.

• The MPC adjusted its forecasts from January to October as follows:
• Headline inflation – 4.7% to 3.2% (reduction of 150 basis points).
• Core inflation – 4.3% to 3.3% (decrease of 100 basis points).
• GDP for 2025 – 1.2% to -8.0% (contraction of 920 basis points).
• The impact of the Covid-19 pandemic on the economy.
• The repo rate decreased from 6.25% to 3.5% (a difference of 275 basis points).

Observations about the repo rate during the past 10 years (November 2010 – October 2025)

The SARB cut the repo rate from 6.0% to 5.5% per annum in November 2010, the first of seventeen adjustments to the repo rate during the past 10 years.

The table below is a summary of the adjustments.

The following points are worthy of note:

• The average of the months between repo rate adjustments is 12 months.
• The expected average headline inflation rates during the months of repo rate adjustments vary from 3.4% (May and July 2025) to 6.8% (January 2016).
• The average repo rate for the 10 years is 79%.
• The repo rate varies between 7.0% (March 2016 to July 2017) and 3.5% (since July 2025) – a difference of 350 basis points.

The repo rate from 1998 to 2025

Interesting to note, the repo rate ranged between an all-time high of 23.99% in June 1998 and a record low of 3.5%, since July 2025.  A significant difference of 20.49 basis points and a decrease of 85.41%! The average repo rate for the period 1998 to 2025 is 12.31%.

The effects of the repo rate

The interest rates charged by the commercial bank is linked to the repo rate. When the repo rate is adjusted (upward or downward) by the SARB, the commercial banks and other financial institutions adjust their interest rates accordingly.

The difference between the repo rate and the prime rate is 350 basis points. Hence, the current prime rate in South Africa is 7% (as of November 2025).

A decrease in the repo rate implies that borrowers will pay less interest on their loans, allowing the borrowers to spend more or to pay the extra money available on their outstanding debt. However, borrowers with loans with fixed interest rates will not necessarily benefit.

Contrarily, investors will receive less interest on their investments, implying less money to spend or save.

Inevitably, when the repo rate increases, it is a vice versa situation for borrowers and investors.

The repo rate and inflation have an inverse relationship. When the rate is increased, it will constrain inflation and vice versa – when the repo rate is lowered, inflation will rise.

[i] The contents of this sector of the article is based on the SARB’s Fact Sheet 9, ‘The South African Reserve Bank’s system of accommodation’ and chapter 2, ‘The South African Reserve Bank’, by Sandra Mollentze, in  ‘Understanding Financial Markets’ (second edition), published by Van Schaik Publishers in 2006. (Editors: Cecilia van Zyl, Ziets Botha, and Peter Skeritt.)

[ii] Citations in this sector are either from SARB’s Fact Sheet 9 (referred to as SARB/FS9) or chapter 2 in ‘Understanding Financial Markets’ (referred to as UFM/C2). Accentuations in citations in the article are by the article writer.