Litigants must ensure that they use the most recent and correct prescribed rate of interest when instituting any legal proceedings that includes a claim for interest. In terms of claims for interest in certain labour disputes, section 143(3) of the Labour Relations Act 66 of 1995 is relevant. Section 143(3) states that an arbitration award (sounding in money) earns interest from the date of the award at the prescribed rate of interest. The only exception to this general rule is if the arbitrator makes a ruling to the contrary.
On 23 July 2020, the Monetary Policy Committee of the South African Reserve Bank (SARB) decreased the benchmark interest rates by 25 basis points as follows:
According to SARB, the decrease can be attributed to various factors including uncertainty in financing conditions for emerging markets, depreciation of the rand and economic contraction.
The decrease in the repurchase rate has resulted in a drop in the prescribed rate of interest. On 11 September 2020, the Minister of Justice and Correctional Services published a notice in the Government Gazette on the revised prescribed rate of interest, announcing that with effect from 1 June 2020, the prescribed rate of interest dropped from 8.75% to 7.75%. Then, on 9 October 2020 - less than a month later - the Minister has issued a notice repealing the previous revision and announcing an even lower prescribed rate of interest of 7.25%.
Now, on 6 November, a third drop in the interest rate was announced. The new rate is 7% with effect from 1 September 2020.