Prime Interest Rate in South Africa
This page shows the current prime interest rate, as well as a graph and table of the prime interest rates in South Africa, since 1948.
The prime interest rate was last updated on . The current prime interest rate is %.
Prime Interest Rate Graph
This is a graph of the prime interest rates in South Africa, since 1948. To see what the prime interest rate was at a specific time, move your mouse over the graph.
Prime Interest Rate History
The following table shows the historical prime interest rates in South Africa, since 1948.
August 26th, 2009 at 07:47 pm
hi.
you have information available on the history of interest rates.
what about interest rate expectations for the next few years?
i am looking for interest rate estimates till September 2011.
August 27th, 2009 at 11:43 am
@Zafreen
I answered your question here:
Interest rate predictions for next two years
September 10th, 2009 at 01:01 pm
Dear Francois,
between 1948 and 1973 the Prime Interest rate remained fairly constant, albeit on a slow upward trend. After 1973 it starts to gyrate. Any expanation? When did SA abandon the Gold Standard?
September 21st, 2009 at 09:22 am
@Mischa
Interesting question.
South Africa abandoned the gold standard back in 1932, so I don’t think it’s correlated.
My guess is that a few things came together and caused inflation to increase sharply during the 1970s. This lead to interest rates being hiked, to keep inflation in check.
Things that may have caused higher inflation for Sough Africa during the 1970s:
- The US experienced high inflation during the 1970s. I’m not sure if and how inflation in South Africa was correlated with that.
- During the 1970s South Africa had sanctions imposed against it.
- In the 1970s black workers were allowed to belong to trade unions for the first time.
I was only born in ‘81 – I was not even alive during the 1970s – so what I listed above is just a guess.
Anyone with a few more life years who can shed some more light on this?
September 27th, 2009 at 07:48 pm
US Dollar – Prime lending rates were kept as low as 1% until the 40’s, then from 1950 to 1970 rose from 2% to 6.75%. In the late 1970s, the US experienced stagflation which was followed with the prime rate peaking at 21.50% in December 1980.
UK Pound – From 2% in ‘49 to over 18% in ‘81 – the graph is similar to that of the Rand .
1949 - 2%
1950 - 2.07%
1951 - 2.56%
1952 - 3%
1953 - 3.17%
1954 - 3.05%
1955 - 3.16%
1956 - 3.77%
1957 - 4.2%
1958 - 3.83%
1959 – 4.48%
1960 - 4.82%
1961 - 4.5%
1962 - 4.5%
1963 - 4.5%
1964 - 4.5%
1965 - 4.54%
1966 - 5.63%
1967 - 5.63%
1968 - 6.31%
1969 - 7.95%
1970 - 7.91%
1971 - 5.72%
1972 - 5.25%
1973 - 8.02%
1974 - 10.8%
1975 - 7.86%
1976 - 6.84%
1977 - 6.82%
1978 - 9.06%
1979 - 12.67%
1980 - 15.27%
1981 - 18.87%
1982 - 14.86%
1983 - 10.79%
1984 - 12.04%
1985 - 9.93%
1986 - 8.33%
1987 - 8.2%
1988 - 9.32%
1989 - 10.87%
1990 - 10.01%
1991 - 8.46%
1992 - 6.25%
1993 - 6%
1994 - 7.14%
1995 - 8.83%
1996 - 8.27%
1997 - 8.44%
1998 - 8.35%
1999 - 7.99%
2000 - 9.23%
2001 - 6.92%
2002 - 4.68%
2003 - 4.12%
2004 - 4.34%
2005 - 6.19%
2006- 7.96%
2007 -8.05%
2008 - 5.09%
October 24th, 2009 at 09:08 am
Francois,
Thanks for the highly useful graphs.
How have (term) bank deposits fared over the last 2 decades or so? Have the high rates of interest earned compensated for the debasement of the currency?
October 28th, 2009 at 04:24 pm
@Robbie
I haven’t been in the know for long enough to comment on the situation 20 years ago; I can only give an opinion about the last decade.
Q: Have the interest rates offered by banks, on long-term deposit accounts, over the last 10 years, compensated for inflation?
A: It depends mainly on two factors: whether you chose the right accounts and the amount of tax you had to pay on the interest you earned.
If you did your homework before investing your money in a long-term deposit account, and chose the accounts with the lowest bank charges and highest interest rates, then yes, you could have earned an interest rate that at least equalled inflation.
However, this is a big if. Most term-accounts offered by the big banks in South Africa over the last decade paid interest rates that were, for the lack of a better term, superbly crap, and not worth a second look by the wise investor.
But there were some some banks that offered good interest rates. They were mostly the smaller, lesser known banks, e.g. ICanOnline, Pick ‘n Pay GoBanking and more recently Capitec.
The second part of the equation is tax. Interest earned on cash investments are subject to income tax. There is a tax-free bracket, but this is not much (I think currently it is about R18000), but once you earn more interest than this in a year, you have to add it to your taxable income, which greatly reduces your returns.
Because of these reasons, even though cash should form a part of any balanced portfolio, it is not really attractive to keep most of your investments in interest-earning cash. Your “real” (after-inflation) return on cash is usually negative, or just barely positive.
December 4th, 2009 at 06:52 pm
How can I calculate a debt amount to date, if the amount was loaned approximately 14 years ago at prime rate and no repayments have been made? I could not find such a useful tool on the net, yet – all the calculators ask me to insert an interest amount.
Thanks.
December 6th, 2009 at 09:18 pm
@Marais
I was in a partnership a few years ago when I had to do a very similar calculation, after one of the partners granted a loan to the partnership, at a prime-linked interest rate.
You’re absolutely right, most tools on the net will only allow you to do calculations using a fixed interest rate.
The reason why is that there is no simple way to do such a calculation. The only way is to do many separate calculations.
You start with the loan amount and interest rate 14 years ago. Then you calculate the amount when the interest rate was changed for the first time after that. Then calculate the amount owing when the interest rate was changed again after that.
You repeat this process over and over again, until you get to the current date.
Does this make sense?
P.S. Remember to take into account the correct interest accrual frequency (i.e. is interest added daily, monthly or yearly) when you do your calculations. The interest accrual frequency can make a HUGE difference to the amount owing over a 14 year period.
January 13th, 2010 at 07:44 pm
Hi Francois,
What is your take on property versus traditional pensions? This may be simplistic, but let me play out a scenario.
1st I plugged in my age (43) to your retirement calculator, and to realise R20k at age 65 I’d have to contribute R11½k monthly. Let’s assume for some bizarre reason (called Bob) I am only starting my pension contributions at 43! Now R11½K/mth is no mean feat.
If, instead, I bought a flat for rent – say R300k with a rental income of R3k/mth today. All things being equal I’ll have a couple of years of minor shortfall – less than R1k/mth. If the rent increases annually pegged to inflation (say 10%) and the interest does not go completely mad (let’s say I fix it with my bank), then the rent will outstrip monthly expenses (including agents, repairs, etc. in about years 3-4. Thereafter it is profit generating. If I re-invest those profits AND keep up my monthly contribution of say R1k/mth, the flat will be paid off in less than 8 years. It will be generating an income equal to R3k in today’s value – which if you do the progressions will be R6.4k/mth in 8 years or R20.1k/mth in 20 years.
So, do the sums. I will have contributed 3½yrs x 12mths x 1k = R42K (ABSOLUTE MAXIMUM) to realise the same pension that the ‘generous’ pension houses ask me to contribute R11½k/mth towards for the rest of my working life, or in other words R3.3mil.
If I was out in my assumptions by a factor of 10 I would still be 10 times better off!
One more hidden benefit – the bank would even be lending me the money to do this investment. I’d be interested to see any traditional pension that could compete.
January 15th, 2010 at 10:57 pm
@Ant
I’m not a big fan of most traditional pensions and neither am I a big fan of property. But a lot of that is just my preference.
I think you’ve got some of your estimates and calculations wrong.
Here are some problems with your estimates / calculations:
1. Generating R3k a month rental income from a R300k property is not very realistic. You’d be lucky to get half of that, especially if you take into consideration that some months you may be without tentants.
2. You have not considered general expenses on properties like property tax, maintenance & repairs, management fees and other unplanned fees (e.g. lawyers fees for getting out tenants who don’t pay).
3. You’re projecting that you’ll earn R20k a month from your property in 20 years time, which is all good and well, but the R20k calculated in the retirement calculator is R20k in TODAY’s terms (i.e. ignoring the effects of inflation). Thus, the rent from your property will only be a fraction of that (probably 5% to 10%).
4. Please remember to take into consideration that the interest rates in South Africa are currently at the lowest level they’ve been in about 20 years, that inflation is still hovering around 6% (the upper band for SARB) and that it is likely to increase, especially thanks to ESKOM’s ridiculous tariff hikes. There is a VERY GOOD chance that interest rates will be going up over the next few years.
Other problems with property:
1. It’s highly illiquid. It takes a lot of time to get rid of it if you need to.
2. Properties are expensive. I.e. it is difficult to diversify, because most people will only ever own a handful of properties. If you make one mistake and make a bad buy, it can be game over 1-2-3. With shares, there are no such problems. A few thousand rands can buy you a well diversified portfolio.
3. Again, back to diversification. Because properties are expensive, comparative to most people’s net-worth, by simply owning a house to live in they are already WAY over exposed to property.
4. Property is not a passive investment. It requires a lot more admin and effort than a pension fund / unit trust / plain old shares.
I’m not saying that property is a bad investment. Making a killing from property is possible.
BUT, it will take a lot of hard work, research and dedication.
The same can be said for most other asset classes – if you do the legwork and the research, and actively keep your finger on the ball, you can do very well.
The bottom line is that over the long term property doesn’t really outperform a well-balanced share portfolio.
And if you believe that it really will, then why not rather buy shares in a publicly listed company that owns a lot of property?
In that way you’ll have a liquid investment that you can convert to cash in a few hours, not have to worry about any of the management or hassles, uncooperative tenants, leaking toilets, etc., and you can invest a much smaller amount, keeping your exposure to property to a reasonable level.
My advice for most people would be to simply invest in a passively managed index fund (e.g. the SAFRIX RAFI) and forget about active management or getting involved directly.
If you want to actively manage your investments, then invest in something that you really love and have a passion for and have the time to do it properly.
If that thing is owning and fixing properties, then there you go. If it is not, then do yourself a favor and stay away.
All of what I say here comes from personal experience. I’ve been there and tried it.