By Colleen Goko and Kopano Gumbi
JOHANNESBURG (Reuters) -South Africa’s central bank believes it has reached a “neutral zone” on interest rates after its latest cut and now needs government reforms to spark stronger economic growth, Reserve Bank officials said on Thursday.
Africa’s most industrialized economy has grown by less than 1% annually on average over the last decade due to a combination of structural challenges, including high unemployment and energy supply issues as well as moderate global growth.
The Reserve Bank cut the benchmark interest rate by 25 basis points to 7.25%. It has taken it down from 8.25%, with the first cut in September of 2024. Deputy governor Rashad Cassim said borrowing costs were no longer seen as “restrictive” for the economy.
“We are now more or less in this neutral zone, recognising of course that there are imperfections in how you measure these things,” Cassim said, referring to the level of interest rates.
“We don’t premeditate being in a cycle partly because of the uncertainty and the nature of things moving very fluidly,” he added, pointing to the risks posed by trade tariffs.
The central bank said it was confident that government efforts to reform the country’s energy, transport and water sectors and its work visa system would eventually bear fruit.
“These sets of reforms are going to generate stronger growth,” the bank’s head of economic research, Chris Loewald, said.
Still, economic indicators have been disappointing. The bank lowered its 2025 growth forecasts to 1.2% from 1.7% on Thursday and Loewald said that more robust private sector investment is needed to make reforms stick.
There’s progress Loewald said, “but the faster it happens, the faster we’ll get to much stronger growth rates.”
(Reporting by Colleen Goko, Kopano Gumbi; editing by Giles Elgood)
