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Prescribed Rate of Interest

The Prescribed Rate of Interest Act, 1975 (as amended) provides for “the calculation of interest on a debt, in certain circumstances, at a prescribed rate” and “for the payment of interest on certain judgment debts”.

Section 1(1) of the Act provides that:

“If a debt bears interest and the rate at which interest is to be calculated is not governed by any other law or by an agreement or trade custom or in any other manner, such interest shall be calculated by the rate contemplated in subsection (2) (a) as at the time when such interest begins to run, unless a court of law, on the ground of special circumstances relating to that debt, orders otherwise.”

This is to say, and by way of example, unless an agreement has been concluded between two parties in terms of which a particular rate of interest has been specified, any interest on an over-due payment will be calculated at the prescribed rate of interest.

In terms of subsection 2 (a) of the Act (read with subsections 2 (b) and (c)), the prescribed rate of interest is the repurchase rate determined from time to time by the South African Reserve Bank, plus 3,5% per annum.  Whenever the repurchase rate is adjusted, it is required that the amended rate of interest be published in the Gazette. Such interest rate is effective from the first day of the second month in which the repurchase rate is determined by the South African Reserve Bank.

At present, the prescribed rate of interest is 10% per annum.  This rate of interest is applicable with effect from 1 May 2018.  Previously, the prescribed rates of interest per annum were 15,5% (for the period 1 October 1993 – 31 July 2014), 9% (for the period 1 August 2014 – 7 January 2016), 9,75% (for the period 8 January 2016 – 29 February 2016) and 10,25% (for the period 1 March 2016 – 30 April 2018).

When determining the applicable rate of interest, despite the rate of interest varying from time to time, it is however not required that the rate of interest is to be varied as at particular points in time (being the commencement dates for each period mentioned in the paragraph above) having regard to the period for which the debt may exist. In the matter of Davehill (Pty) Ltd vs Community Development 1988 (1) SA 290 (A), the Appellate Division held that the prescribed rate at the time when mora interest begins to run is fixed at that time and remains constant, notwithstanding that different rates may be prescribed from time to time.

It is important to know the current applicable prescribed rate of interest as well as the historical rates of interest in order to ascertain which rate of interest is applicable given the particular circumstances of any given matter.  This will ensure that a creditor is able to recover interest which may be due on a debt owed to him/her at the maximum allowable rate.


This article is not intended to provide legal advice; it is for general information purposes only and to provide a general understanding of the law.  It is advisable that advice relating to the specific circumstances of your matter be sought from an attorney before acting upon the content of this article.  This article is written at a particular point in time and accordingly may not always reflect the most current legal developments, legislation and/or judgments which may be applicable from time to time. The author and/or Rushmere Noach Incorporated are not responsible for any errors or omissions in the content.