The South African Reserve Bank (SARB) has once again reached for its favourite tool: higher interest rates.
On 28 May 2026, the Monetary Policy Committee increased the repo rate by 25 basis points to 7%, translating to a prime lending rate of 10.5%, while citing rising inflation risks, fuel price pressures linked to conflict in the Middle East, and concerns about so-called “second-round effects” in the economy.
In theory, this makes sense. Inflation rises, interest rates rise, consumers spend less, prices cool down. Economics textbooks are delighted. Reality, however, did not receive the memo.
South Africans are already being squeezed from every conceivable direction. Fuel levies have increased again, adding further costs to transport, logistics and food prices. Government openly expects more than ZAR 100bn in fuel levy revenue while consumers absorb the consequences every time they fill a tank. The average household is not splurging on luxury yachts, private jets or champagne fountains. It is trying to survive school fees, bond repayments, vehicle finance, electricity increases, food inflation and fuel costs. Yet SARB appears to be treating consumers as though they are recklessly overheating the economy with excessive spending. But one wonders where exactly this economic overheating is taking place?
Certainly NOT in a country battling one of the highest unemployment rates in the world. Certainly NOT among small businesses struggling to stay afloat. And certainly NOT among homeowners watching monthly repayments increase while salaries remain largely stagnant.
SARB argues that inflation expectations must remain anchored and that it must act pre-emptively against future price increases. But much of the inflation pressure it seeks to combat originates from factors completely beyond the control of South African consumers.
South Africans did not start a war in the Middle East.
South Africans do not determine global oil prices.
South Africans do not control shipping routes, energy markets or geopolitical tensions.
Yet they are expected to pay higher bond repayments because of them, an irony that is difficult to ignore. Governor Lesetja Kganyago himself acknowledged that interest rates cannot influence global oil prices. Nevertheless, households are effectively being charged a premium for geopolitical events occurring thousands of kilometres away.
Meanwhile, one of the greatest threats to economic growth receives comparatively little attention: South Africa’s own administrative dysfunction. While potential investors do not only examine inflation statistics and interest rates, they also look at whether they can obtain work permits, business visa or permanent residence permit approvals within a reasonable (sic!) time frame … this is where the Department of Home Affairs (DHA) enters the story.
South Africa continues to advertise itself as open for investment while simultaneously subjecting investors, skilled professionals and businesses to visa and permit processing delays that would test the patience of a saint. Applications often disappear into bureaucratic limbo for months or even years. Appeals take extraordinary periods to resolve. Businesses cannot plan effectively when critical immigration decisions remain outstanding indefinitely. The result is predictable:
Investors become cautious.
Skilled individuals look elsewhere.
Businesses postpone expansion.
Economic growth weakens.
Job creation suffers.
Yet somehow the solution presented to South Africans is another interest rate increase? It resembles a doctor prescribing stronger painkillers while ignoring the fact that the patient is still being repeatedly struck with a hammer.
SARB’s own forecasts show weaker growth ahead while simultaneously acknowledging rising inflation risks. The country therefore finds itself in a particularly uncomfortable position: slower growth, rising living costs and higher borrowing expenses all at the same time. The uncomfortable question is whether South Africa has become excessively dependent on monetary policy to compensate for failures elsewhere?
Interest rates can influence demand. They cannot fix unemployment.
Interest rates can influence borrowing behaviour. They cannot process visas.
Interest rates can influence credit growth. They cannot eliminate administrative incompetence.
But most importantly, interest rates cannot create confidence when investors encounter a state that too often appears unable to perform its most basic functions efficiently.
South Africans understand the need for responsible monetary policy. What many struggle to understand is why households are continually expected to carry the burden for inflation driven by fuel shocks, government levies, infrastructure failures and bureaucratic inefficiency. At some point, the conversation must move beyond simply asking whether inflation is under control. The more important question may be whether government itself is under control? Until then, South Africans will continue receiving the same message from policymakers: the economy has a headache, so citizens should take another financial aspirin.
… even if the headache was caused by government in the first place!