Interest rate hike hampers farmers

The increase in the interest rate to 0,5% signals tougher times for farmers as the cost price squeeze intensifies.

The interest rate was increased by 50 basis points on Wednesday, 30 January, in a move to suppress inflation amid a plunging rand.

Ernst Janovsky, head of Absa AgriBusiness, said the increase in the interest rate would ultimately mean that farmers will have to think twice about capital investments as the cost of lending increased.

“Farmers will be susceptible to more risk as the increased cost in doing business will have to come straight from their bottom line.”

However, he added that the increase was good for the country as it reduced the effects of rising inflation. “It also signals to the consumer that things could get expensive and that more saving is in order. The higher interest rate will also encourage more investment in South Africa, which could then lift the rand.”

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