FinTech company’s data suggests the Reserve Bank’s caution has potentially stifled growth for SMEs.
A FinTech company believes the challenges faced by small and medium enterprises (SMEs) will persist even if the South African Reserve Bank’s (Sarb) Monetary Policy Committee (MPC) decides to cut the repo rate on Thursday.
The interest rate announcement comes just ahead of the deadline of 1 August 2025 for tariff negotiations with the United States (US), a factor that could make things worse for many businesses in the country.
Garth Rossiter, chief risk officer at Lula, says while some economists predict a potential repo rate cut, which will make things better for consumers and businesses alike, the reality for small businesses will remain tough.
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Pressure on SMEs
According to Lula’s data, there has been a significant impact on SME turnover over the past year, underscoring the persistent financial pressure.
“The data shows that the Sarb has been proceeding more cautiously than some might hope, and this is potentially stifling growth. Consistently low inflation and high interest rates create a real brake on growth, which our economy can ill-afford.”
Rossiter adds that consumers and small businesses need stability and an enabling environment to thrive.
Impact of US tariffs on SMEs
He highlights that every policy decision, including tariffs, has a direct impact on SMEs’ ability to operate, grow and create jobs.
“It is all a trade-off, but at the moment, the benefit of Sarb taking a much bolder move on interest rate cuts to drive economic growth outweighs the short-term inflation risk,” Rossiter adds.
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He notes that the deadline for tariff negotiations adds another layer of uncertainty, as changes in both import and export duties can drive inflation by directly affecting input costs, pricing strategies and competitiveness for businesses involved in trade.
The next step
“The possibility of these tariffs should motivate small business owners to invest in their competitive advantage and urgently scrutinise their internal operations for efficiencies,” he says.
“If your product offers exceptional quality, niche appeal, or a distinct competitive advantage, demand can persist even with higher tariffs.”
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