Skip to main content

SMEs must take advantage of interest rates reprieve to improve management of debt

| Economic factors

Small and Medium Enterprises (SMEs) must use the current interest rates reprieve to improve management of debt. This is according to Daniel Kaan, CEO of Core Lending at FNB Business.

“Small business needs to use this period to proactively manage debt and minimise the potential impact of a future rate hike. Businesses should start the process by re-evaluating their debt commitments, pay-off or consolidate smaller payments to enable better financial control. This is vital because economists are predicting a marginally increase in interest rates before the end of the year.”

After the SARB’s decision a few weeks ago to keep interest rates unchanged, Sizwe Nxedlana, FNB Chief Economist explained that, “The repo rate was kept on hold as inflation was within the SARB target band (3% - 6%) and economic growth remained under pressure. However, we anticipate that inflation will begin to rise over the coming months due to deterioration in the outlook for food and fuel prices. Given the rising inflation profile, the SARB is expected to hike the repo rate later this year. Consumers and businesses are advised to take this into account when planning their finances.”

Daniel Kaan says the decision to keep interest rates unchanged was an important reprieve as SMEs have had to deal with a number of unavoidable costs.  

“Currently, SMEs are still adjusting to the rise in operating costs after the substantial increase in fuel and electricity prices during the first quarter of this year. More importantly, power supply constraints continue to pressurise businesses to fund explore alternative solutions to remain sustainable.”
Recently, the South Africa Reserve Bank cautioned the market about the risk of rising inflation on interest rates. The SARB pointed to risks factors such as the potential increase in electricity tariffs, weakness of the Rand, and higher than expected wage settlements in various sectors of the local economy.

Related Articles

Official fuel prices for December: margin hikes...

By: Jason Woosey - IOL The Department of Mineral Resources and Energy (DMRE) has announced the official petrol and diesel price adjustments for December.

South Africans predicted to spend R224bn this f...

According to the results from the sixth annual Summer Spending Survey by short-term lender Wonga, South Africans are expected to spend an estimated R224 billion over this year’s festive season.

Grocery budgets: Say goodbye to these foods as ...

By: IOL Business Fried chips, potato salad, baked or roasted potatoes, and stews and curries with potatoes – whichever your favourite, you may have to do without if you have any hope of spending less on groceries in the coming weeks. And don’t p...

Black Friday shoppers spent R4.5bn, with jewell...

By: TimesLive Black Friday 2023 levels reflected tougher economic conditions in South Africa, but sales totalled R4.5bn.

December fuel price outlook is good news for bo...

By: IOL With a week to go until December’s fuel price sums are finalised, the outlook is positive for both petrol and diesel.