The Decision Nobody Announced

Somewhere in this country, a job was meant to be advertised in November and now will not be. Nobody will announce it. There is no statement and no way to count it, because you cannot count something that was never created.

That is part of what an interest rate increase does, and it never appears in the reporting, because there is nothing there to report.

Start with what you came for, because it is real money.

The South African Reserve Bank raised the interest rate by a quarter of a percent, putting the prime lending rate at 10.75 percent. On a bond of a million rands over twenty years, that adds about R168 to the monthly instalment, a little over R2,000 across a year.

That much you will read everywhere. What you will not read is where the R168 goes.

None of it touches what you owe. Before the increase, roughly R1,234 of that instalment reduced the loan, and the rest was interest. Afterwards, about R1,194 reduces the loan. You pay R168 more every month and R40 less of it comes off your house, because the interest rose by more than the instalment did and the difference came out of the part that was paying down your debt.

The money leaves your pocket. The balance does not move faster. It moves slower.

And that is still the smaller half of this story.

Raising the interest rate is not really an instruction to bondholders. It is an instruction to the whole economy to slow down. You make borrowing more expensive, so households spend less and businesses expand less, and when enough people buy less, shops and factories can’t raise prices. The slowdown is not an unfortunate side effect. It is how the policy works.

And a country that deliberately spends less is a country that deliberately hires less.

The Reserve Bank deserves a fair hearing. Prices are rising at about 4.4 percent a year and it would like them nearer 3 percent. Inflation is the most regressive force in an economy because food, transport, and electricity make up almost the entire budget of a poor household and a fraction of a wealthy one. When prices run away, the person with the least loses most, first and fastest. So a central bank that fights inflation is doing the most pro-poor thing it can. It had one lever and pulled it.

Which raises the obvious objection. This is a country that needs to grow. The economy expanded by 0.9 percent in the second quarter, down from 1.9 percent in the first. Nothing here is overheating. So what is being slowed down?

The answer is that the Reserve Bank is not responsible for growth and was deliberately not made responsible for it. Its job is the value of the money. That separation exists for good reasons.

But it produces an uncomfortable result. What is pushing prices up is mostly not anything a South African household is doing. Fuel is priced abroad. Regulators and councils set electricity and municipal charges. Food follows the weather and the cost of getting a container to a shelf. None of that is caused by people spending too freely, and none of it responds to an interest rate.

So, the Bank suppresses the demand it can reach, because the causes it cannot reach belong to someone else.

The question is not whether the Bank was right. It is who pays for it being right.

A rate decision reaches a household through one of two doors. It comes through your debt, or through your job.

The first door is narrower than it looks. Roughly 1.6 million home loan accounts exist in a country of 63 million people.

Which is where our own arithmetic matters. South Africa’s Gini coefficient, the measure of how unevenly income is shared, sits at about 0.63, the highest of any country that publishes one. That is not a statistic about poverty. It is a statistic about distance. It means one decision, taken in one room, arrives at two addresses with almost nothing in common.

At the first address it arrives as that R168, which is felt, and which reverses. When the cycle turns, it comes back.

At the second address it arrives as a job that never appears.

There are already 8.5 million people in this country without work, and among those aged fifteen to twenty-four, more than six in ten are unemployed. These are not people who will feel a rate increase. They have no bond and no car finance, and the announcement changed nothing they owe, because nobody will lend to them. But it changed their year anyway.

The two consequences are not the same size. An instalment is a cost. A job is a starting point. A person who does not enter work at twenty-two loses the compounding of everything that would have followed, and no future rate cut gives it back.

This is the trade we make every time. We protect people from rising prices by slowing the economy that would have employed them. Both halves of that sentence are true, and both land on the same people.

None of which makes the decision wrong. Runaway inflation would have been worse, and worse for the same households. But a decision being correct is not the same as a decision being painless, and the people bearing most of the pain are not the ones consulted or quoted afterwards.

So, when the next decision comes, notice what gets counted. The instalment will be worked out to the rand, as it was here, because it can be. The other thing will not appear, because it cannot be. And somewhere a company will quietly decide to wait until next year before filling that post.

The person who would have had it will not read about the rate decision, and will not connect the two things for a moment.

They will pay for it in a year of their life, and nobody will ever tell them why.

 

Yusuf Bodiat is a chartered accountant, certified director and former chief financial officer. He is the founder of Pragmatic Thinking, an independent strategic advisory firm, and serves as a non-executive director on several boards. He is the author of The Bottom Line: A CFO’s Blueprint for South Africa’s Turnaround, published in February 2026.