In one of our previous articles (Recent changes to the prescribed rate of interest) we looked at the Prescribed Rate of Interest Act and we explained that it provides for the calculation of interest at a prescribed rate on an interest-bearing debt where the rate is not governed by any law, agreement or otherwise.

We also explained that –

  • interest was calculated at the repo rate plus 3.5%.
  • When the Reserve Bank changes the repo rate a new prescribed rate of interest becomes effective from the first day of the second month following the month of the new repo rate announcement.
  • The applicable rate of interest for any debt is the rate that is in effect on the due date for payment or the date of demand for payment where there is no fixed due date.
  • That rate will continue to apply even if the prescribed rate of interest changes at a later date.

There have since been many changes to the repo rate, the latest being that on 26 June 2020, the Minister of Justice and Correctional Services published a reduced prescribed rate of interest (legal interest), for the purposes of the Act.

The rate of interest has dropped from 9.75% to 8.75% , with effect from 1 May 2020.