Ramaphosa fiddles while South Africa burns

Although property experts welcomed the Reserve Bank’s latest interest rate cut, they warned that the short-term relief masks deeper economic troubles, pointing to President Cyril Ramaphosa’s failure to steer the country away from looming disaster.

Reserve Bank Governor Lesetja Kganyago announced on Thursday, 31 July, that interest rates will be cut by 25 basis points, bringing the repo rate to 7% and the prime lending rate to 10.50%.

This is the third interest rate cut in 2025 and the fifth since September 2024. In the current cutting cycle, rates have decreased by a cumulative 125 basis points.

Samuel Seeff, chairman of the Seeff Property Group, said this is the correct decision, given that inflation, at 3% for June, is within the central bank’s target range, and the currency has been relatively stable.

The total rate cuts since September mean that interest rates will now be 1.25% lower compared to 2024. This decrease has also brought the prime lending rate to its lowest point since 2022.

“The rate cut will make home loans more affordable and property buyers will find it slightly easier to qualify, thus opening more doors to homeownership,” Seeff said.

“We would therefore certainly encourage buyers to take advantage of the opportunities in the market.”

“Higher demand and improved house price appreciation at around 3.7% nationally, topping inflation for the first time in two years, also provides incentive for sellers, especially since many areas are in need of more property listings.”

While the rate cuts have been well received, Seeff said the economy and property market have not yet felt any notable impact.

“The first quarter GDP growth was disappointing. After an initial surge, the overall property transaction volumes for the first half of this year are about 16% below the same time last year. Bolder rate cuts are needed,” he said.

Even after the latest cut, the interest rate is still higher than it was in January 2020, before the onset of the Covid-19 pandemic.

“We continue to urge the bank to step up with more cuts now while inflation is contained, and the currency is stable,” he said.

The table below shows how the 25 basis point rate cut will reduce mortgage repayments, based on a 20-year repayment period at the prime rate.

Bond	Repayments before cut	Repayments after cut	Saving
R750,000	R7,614	R7,488	R126
R900 000	R9,137	R8,985	R152
R1 million	R10,152	R9,984	R168
R1.5 million	R15,228	R14,976	R252
R2 million	R20,305	R19,968	R337
R2.5 million	R25,381	R24,960	R421
R3 million	R30,457	R29,951	R506
R5 million	R50,761	R49,919	R842

South Africa circles the drain

Although property experts welcomed the rate cut, this excitement was dampened by broader economic concerns, particularly surrounding looming tariffs from the United States.

“It’s certainly great that the financial pressure on households will ease slightly in the short term,” said Yael Geffen, CEO of Lew Geffen Sotheby’s International Realty.

“But we’re on the precipice of an economic disaster, and while this rate cut will help for now, it might come back to bite us in the long term.”

On Wednesday, 30 July, the United States Federal Reserve announced that it would not be cutting interest rates, with rates remaining steady at 4.25% to 4.5%.

“The United States Federal Reserve chose not to cut rates this week when America’s economy ramped up to 3% growth in the second quarter, while we’re easing back when ours is circling the drain,” Geffen said.

“We have record unemployment, basic household costs such as electricity have risen by several hundred percent in recent years and on average, households are spending an alarming two-thirds of their income servicing debt.”

Even though the most recent rate cut has brought the prime lending rate to its lowest level in three years, she warned that South Africa is far from an economic turnaround.

“President Cyril Ramaphosa has backed the country into an untenable economic position from which we will need a miracle to escape,” Geffen said.

With the 30% tariff from the United States against South Africa set to come into effect on 7 August, later than the initial 1 August deadline, Geffen said the country’s most significant industries will take a critical hit.

Kganyago estimated that this could cause around 100,000 job losses, with the agriculture and automotive sectors impacted the most.

According to Reuters, the rand has also taken a hit, remaining at its weakest levels since 15 May. This reflects investor uncertainty ahead of trade negotiations with the United States.

“Ramaphosa will go down in history as the president who fiddled while Rome burned,” Geffen said. “Not only that, but he lit the match.”

“Say what you like about United States President Donald Trump, but he’s gone into office with one objective: to put the welfare of his citizens first. Wouldn’t it be great if South Africa’s president did the same?”

She explained that the volatility on the trade front is one of the major reasons South Africans have been returning to the safety of property investment because it’s tangible.

“Real estate will always be a safe haven investment. It is a long-term appreciation asset, people understand that it is the foundation of personal wealth creation, and the uptick in the market this year is testament to that,” she said.

Geffen advised sellers in the current market to be realistic about pricing, and buyers not to extend themselves to the limit.