Would scrapping the prime rate make any difference to the interest you pay on your debt?

South Africa's prime lending rate is in the spotlight amid reports that the South African Reserve Bank (Sarb) is reviewing this benchmark, as first detailed by Bloomberg News.

The Competition Commission has also confirmed it is conducting an investigation into "cartel behaviour" related to the prime rate, according to News24.

But would it make any difference to the interest you pay on your debt if this measure was scrapped? is the question Stephen Grootes is pondering.

The prime lending rate used by commercial banks currently sits at 10.25%, 350 basis points above the repo rate of 6.75%.

And, as we've been familiar with for years, one client may be offered a rate a point or two above, or below prime, according to their credit history.

While the market in general assumes that the central bank sets theprime rate, which has been kept unchanged basically now since 2001 at 350 basis points over the policy rate, this is not actually the whole story, says economist Peter Attard Montalto (MD of consulting firm Krutham).

"If you look back, the Sarb often treats the prime lending rate as an externality, something that 'gets delivered to them from God' if you like. It seems to have fallen between the gaps who actually sets this, so I think it could be very interesting if the CompCom is actually able to tease out where the thing really comes from."

What is certainly the case, is that there is a strong amount of Sarb oversight here, Montalto says.

"In general, I think the Sarb are conscious that the market believes they have some control over it. And that is why there is now a review of what to do about it in the context of a much broader range of reforms, including the way they are implementing monetary policy as they did two years ago, and the change in the inflation target that happend in November."

While the prime lending rate serves as a useful framing device for consumers, Montalto agrees that if it were to be scrapped immediately, this wouldn't really make a difference to people borrowing money from lenders.

"We're not talking about some fundamental shot at reform or any dramatic impact, certainly on rates that people already pay."

To hear more from Montalto, scroll up to the audio player and take a listen