JOHANNESBURG - South African farmers are expected to face tougher times ahead.
A growing El Niño pattern, which has previously led to severe droughts, is expected to increase pressure on the agricultural sector, with farmers likely to incur higher input costs.
South African Reserve Bank Governor Lesetja Kganyago has warned of a potential “food shock”.
The Reserve Bank increased the repo rate by 25 basis points on Thursday.
"Our decision was aimed at managing risks and ensuring that inflation returns to target," says Kganyago.
This marks the first interest rate increase in three years, coming at a time when fuel prices are rising due to global conflict in the Gulf.
The hike also coincides with various municipal tariff increases taking effect across the country.
Economist Xhanti Payi says the Reserve Bank was in a difficult position.
Higher interest rates mean consumers spend more on debt repayments, leaving less disposable income for goods and services.
This typically helps cool inflation, but it also puts pressure on households already under strain.