SARB maintains repo rate at 7%, bringing relief to homeowners and property buyers

The South African Reserve Bank (SARB) decided to keep the repo rate at 7%, while the lending rate stands at 10.5%. This decision was made by the Monetary Policy Committee (MPC) on Thursday.

Reasons for the MPC's Decision

The MPC, which held a meeting on Thursday, stated in a release from SARB Governor Lesetjo Kganyago that various scenarios regarding inflation expectations and fuel prices were analyzed before making the decision.

Inflation and Economic Data

This decision followed the South African Statistics Agency (Stats SA) reporting on Wednesday that annual consumer inflation accelerated to 5% in June, higher than the 4.5% recorded in May and exceeding market expectations of 4.7%.

Regarding South Africa's economic growth, the MPC noted that first-quarter growth was stronger than forecasts, approaching 2% year-on-year. However, this growth was driven by an increase in net exports rather than domestic demand.

Forecasts and Concerns

The Committee forecasts a slowdown in growth during the second and third quarters of the current year. It highlighted a sharp decline in consumer confidence and weakening business confidence. According to sectoral surveys, there is a general decrease in activity since the start of the war. Furthermore, export prices have fallen, although trade conditions have improved due to lower import prices.

The MPC added that while there was good momentum at the beginning of the year, households were affected by rising fuel prices, and uncertainty negatively impacted investments. The baseline forecast is that the economy will begin to recover in the second half of the year as the shock subsides, although the overall outlook remains uncertain.

Inflation Expectations and Voting

On the issue of inflation, the committee reported that according to the latest survey by the Bureau of Economic Research, inflation expectations have risen, with short-term changes being more significant than long-term ones. All surveyed groups expected inflation to rise, with the largest change recorded among trade unions. Market expectations for the break-even point softened from May but remain higher than at the beginning of the year, and there is a risk of increased inflation.

In the vote, four members favored maintaining the rate, while two advocated for a 25 basis point increase. The Committee agreed that the situation is uncertain and believes that the current policy, considering the previous rate hike, is appropriate, as rates remain somewhat restrictive.

Expert Assessment of the Decision

Tys van Zyl, CEO of Everest Advisory Services, a financial service provider, suggested that this decision reflects the Reserve Bank's view that current inflationary pressure is primarily caused by external factors. He noted that the recent rise in inflation is largely linked to external reasons, such as rising fuel prices and the subsequent impact on transport costs and the price of other goods and services.

According to Van Zyl, in this environment, raising interest rates might only have a limited impact on current inflationary pressure while simultaneously placing additional strain on an already struggling economy. He also emphasized that this decision will bring welcome relief to many South Africans, allowing financially strained households to stabilize their positions without increasing debt payments, and providing businesses with greater confidence when making investment and expansion decisions.

The Monetary Policy Committee (MPC) of the South African Reserve Bank (SARB) decided to keep the repo rate at 7% on Thursday. This decision was made cautiously, as rising global oil prices and increasing inflation expectations continue to pose risks to the inflation forecast, despite weak economic growth.

MPC Decision and Voting

SARB Governor Lesetja Kganyago announced that the MPC voted four to two to maintain rates unchanged. Two committee members advocated for a 25 basis point hike, reflecting concerns about persistent inflationary pressure.

Kganyago stated: 'The Committee decided to leave the interest rate unchanged at 7%. Four members preferred maintaining it, while two supported a 25 basis point increase.' He added that the committee agreed that prospects are uncertain, and the current policy is appropriate as rates remain somewhat restrictive.

Impact of Geopolitical Situation

This decision came against the backdrop of renewed geopolitical tensions in the Middle East. This situation led to an increase in Brent crude oil prices from approximately $70 per barrel at the beginning of the month to around $99 per barrel, intensifying concerns over fuel costs and inflation.

Kganyago noted that recent inflation figures remained above the bank's target largely due to higher fuel prices. Meanwhile, food inflation slowed down thanks to good harvests and the reduced impact of foot-and-mouth disease.

Forecasts and Economic Factors

According to Kganyago, overall inflation is expected to exceed 4% until the beginning of next year. The MPC also warned about rising inflation expectations, with the latest survey by the Bureau of Economic Research showing that all respondent groups predict higher inflation, particularly trade unions.

The central bank pointed out that services inflation remains high, and its preferred core inflation indicators continue to point to sustained price pressures. Regarding growth, SARB acknowledged that the economy performed better than expected in the first quarter, growing almost 2% year-on-year, mainly due to stronger net exports.

However, Kganyago cautioned that momentum has since weakened as consumer and business confidence deteriorated following the escalation of the conflict in the Middle East. He emphasized that households have been affected by rising fuel prices, and uncertainty has negatively impacted investment. Furthermore, municipal dysfunction has emerged as a constraint on growth.

Monetary Policy Outlook

According to the Bank's Quarterly Projection Model, interest rates are likely to remain generally stable until the end of the year. A potential rate cut is only being considered if inflation sustainably approaches the Bank's target of 3%. Kganyago reiterated that future decisions will be data-dependent and will be made based on a careful analysis of each meeting, focusing on forecasts, data outcomes, and the balance of risks to the outlook.

The South African Revenue Service (SARS) has paid out billions of rand in tax refunds to taxpayers, but some of these amounts may be received by recipients with a delay.

Automatic Assessment Period Concluded

IOL previously reported that the automatic assessment period by the Tax Service was coming to an end. The service now allows the submission of income tax returns for both temporary and non-temporary taxpayers.

The automatic assessment ran from July 1 to July 12, 2026, and allowed taxpayers with simpler tax affairs to check calculations prepared by SARS using data obtained from employers, banks, medical schemes, pension funds, and other third-party data providers.

Tax Return Submission Phases

Starting from July 13, 2026, the tax return submission season moved to the next phase, opening up the possibility for submissions by temporary and non-temporary taxpayers. Non-temporary taxpayers have until October 23, 2026, to file, while temporary taxpayers must submit their documents before January 22, 202.

Reasons for Refund Delays

Although some taxpayers who underwent automatic assessment have already received their reimbursements, SARS has provided a list of factors that may lead to payment delays.

Factors Affecting Timelines

A tax refund may be delayed for several reasons when submitting a tax return:

• If bank details are entered incorrectly.
• If bank details undergo verification, the process may take up to 21 working days from the receipt of all necessary supporting documents. After the bank details verification is complete, the refund should be made within 72 hours.
• If the income tax return is selected for review, it may take up to 21 working days to complete from the date of receipt of all required documents, after which the refund must be made within 72 hours.
• When submitting multiple tax years, if they are selected for an audit, the process will conclude within 90 working days from the receipt of all necessary supporting documents for all audited tax years.
• If the return is selected for an audit, this may take up to 90 working days from the receipt of all necessary documents in full and correct form, unless alternative arrangements are agreed upon; after this, the refund must be paid within 72 hours.
• The refund will not be processed until all outstanding tax returns have been submitted.
• If there is an unpaid debt on the account, a debt equalization process may be initiated to deduct the amount from the refund and settle any outstanding tax debt before the available credit is released.