SARB pushes ahead with proposed scrapping of prime rate, but is it just a name change exercise?

The South African Reserve Bank (SARB) is pushing ahead with its proposal to discontinue the prime lending rate or PLR, used by banks as a reference point for the borrowing cost to clients, particularly with home loans.

The PLR has become detached from its original purpose as the base rate for pricing credit, says the SARB, leading to widespread misconceptions about its function.

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

The SARB proposes designating its policy rate (SPR) as a replacement rate for the repo.

"The use of the term ‘SARB policy rate’ instead of ‘repo rate’ reflects the evolution of the monetary policy implementation framework."

Publishing its consultation paper on the proposed cessation of the PLR, the SARB invited stakeholders to provide comments and suggestions by 20 March 2026.

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Stephen Grootes interviews Roelof Botha, economic adviser to the Optimum Investment Group and former adviser to National Treasury.

Botha feels strongly that scrapping 'prime' will not change anything in real terms.

"I'm so concerned about the fact that the Monetary Policy Committee (MPC) members, it seems, don't have much to do except hang around in Davos and now they're fiddling with names which will have absolutely zero impact... on the way banks function by determining the margin above or below prime that they will lend to somebody depending on their creditworthiness and aset base etcetera."

Botha shoots down any argument that the proposed change would simplify the way people think about prime, which is really just a rate above the repo rate.

He also dismisses the SARB's statement which describes this as part of ongoing efforts to modernise South Africa’s interest rate benchmarks and align with international best practices.

"I've done a bit of research... Most countries - high-income countries as well as emerging markets of note, have a spread of between 200 and 400 basis points between the official central bank rate and the benchmark mortgage lending rate, and SA finds itself comfortably in that range with 3.5 percentage points. The bank will still determine the lending rate for a client."

Scroll up to the audio player to listen to Botha's argument