A Friday rant about inflation, interest rates and the phishing phenomenon
I received 20 or more emails from South African retail banks this week, but only one was from a bank I conduct business with. Monday through Thursday, one after the other, I received messages about bank account compromises and unauthorised transactions, warning me to take urgent action or lose thousands of rand. One after the other, I condemned these phishing attacks to the deleted items box, and I encourage you to do the same.
Bad news on the inflation front
Sadly, the only official blurb from my bank contained bad news. It communicated that the Monetary Policy Committee (MPC) of the South African Reserve Bank (SARB) had decided to hike the repo rate for the first time since 2023. From 29 May, the repo rate went up from 6.75% to 7%, while the prime lending rate, against which most retail banks fix their home loans, climbed to 10.5%. The decision followed geopolitical shocks and consequent fuel price increases, which chased CPI to 4.0% in April, up from close-to-target 3.1% in March 2026.
The South African economy is transport-dependent, meaning that diesel and petrol price increases quickly filter into the goods and services basket that Statistics SA uses to measure inflation. In January 2026, you or your clients could have filled a 50-litre tank of petrol, 95 octane at an inland pump, for R1037,00. In May, the same top-up cost R1331,00. And diesel, which farmers, miners and logistics businesses burn thousands of litres of each month, is up 69% year-to-date to 28 May. PS, Eskom swallows more than its fair share of diesel too.
There are opportunities in this mess. For example, if I were a financial planner, I would be on the phone 24-7 to explore the financial resilience of my clients. Just imagine the financial impact of recent events on the average household. Seen on its own, the 0.25% increase in interest rates does not sound too bad. It will add R165,00 to R200,00 per month on a million rand mortgage with a 20-year term. Assuming a household owns two financed cars, you might see a similar hit for each vehicle, call it a combined R600 per month on finance charges.
Assuming two petrol vehicles in the household, each using a tank of petrol per month, your clients end up bleeding another R600 or so from the household budget. And that means R1200,00 per month up in smoke without any additional benefit accruing to the household.
The inflation targeting conundrum
Readers of my op-ed will know that South Africa recently changed its inflation-targeting framework. In the past, monetary policy was anchored to a 3% to 6% target range; from 12 November 2025, this was replaced by a 3% target, with a one percentage point tolerance band. Things looked rosy in March, but the ongoing Middle East conflict, including a months-long blockade of the Strait of Hormuz, has kept oil prices around USD100 per barrel, forcing the SARB to revise its inflation forecast to an average of 4.4% in 2026.
The MPC deserves some credit here. They did what any credible inflation-targeting central bank should; hiking rates pre-emptively against mounting upside risks, and stepping in before the oil supply shock becomes embedded. Although two of the six MPC members wanted to keep the repo rate unchanged, I reckon they did the right thing. If anything, they might have seen the writing on the wall earlier in the year, and pulled the hike trigger then. Either way, the SARB has a long track record of a consistent approach to inflationary pressures. It sticks to its rules, independent from government interference.
The central bank now reckons it will take until 2028 before average inflation eventually hits the 3% bulls-eye. Indeed, dear reader, as any handgun enthusiast knows, choosing a target and being able to hit it are two very different things. Inflationary pressures have a knock-on effect on a country’s GDP. At this early stage, the SARB warns that extreme weather, including a worse-than-trend El Niño effect; higher energy costs; and reduced household disposable income will be a drag on the economy, making the already disappointing 1.4% forecast for 2026 unattainable. Revised GDP expectations fall to 1.2% for this year, and 1.7% in 2027.
Bad news for financial intermediaries
This is bad news for brokers and financial advisers, who often rely on economic growth and rising household disposable income to underpin demand for insurance and investment products. In the life market, affordability pressures show up in policy lapses and reduced cover, with clients prioritising basic life cover over other important risk benefits including critical illness, disability and income protection.
Need proof? The Association for Savings and Investment South Africa (ASISA) says risk policy lapses, which occur when policyholders stop paying premiums on a risk policy, rose to 8.7 million in 2025, from 8.2 million in the prior year. More broadly, the association’s 2025 Insurance Gap Study, conducted by True South Advisory, reflects a countrywide life and disability insurance shortfall of around R50.4 trillion. I reckon the latest inflation plus interest rate whammy will translate directly into future updates.
WS Nel, an actuary and research lead for the Gap Study, noted that “more than 85% of earners have no critical illness cover.” In media coverage coinciding with the Gap Study launch, ASISA raised concerns over economic headwinds and steep cost-of-living increases, saying that “most income earners [are not able] to channel 8% of their income towards risk cover.” This was the notional amount the experts determined would be needed to bring risk protection to an adequate level. The message here is consumers have access aplenty, but cannot afford cover.
Affordability remains a major constraint
Affordability stands out as a major challenge in both the personal lines and commercial subclasses of non-life insurance business. TransUnion’s Q1 2026 Consumer Pulse Study found that 35% of South Africans expected to be unable to pay at least one current bill or loan in full, while 51% had cut discretionary spending. And Santam’s 2025 Insurance Barometer report revealed that 80% of personal lines consumers are opting for essential covers only, part-insuring assets through higher excesses or removing items from cover to lower their monthly premiums.
Insurance affordability has a deep impact on consumer financial wellbeing. R1200,00 per month does not sound like much, but given the average pre-tax income across South Africa is in the late-R20 000s per month, it represents 5-6% of after-tax pay, assuming a single-earner household. A bigger issue is the country is sitting on a near 35% official unemployment rate. Neither stat makes for a rosy pro-insurance sales pitch.
This level of financial hardship explains why many of your clients are tempted to respond to the phishing or smishing scams cascading into their inboxes or smartphones. Someone who is stressed about the next debit order, grocery shop or school fee payment is more likely to act on a phishing or smishing attack promising fast cash, a refund or help in stopping funds being drained from a bank account. Criminals understand this pressure, and they do not care whether the victim is rich, poor or somewhere in between.
How to avoid a scam
I would appeal to the country’s brokers and financial advisers to go the extra mile to add real value to their clients. Your role through this economic turmoil is to help your clients retain affordable, appropriate cover within the limits of their household or business budgets. You have to prioritise must-have risk protection, remove nice-to-have benefits if necessary, and keep clients insured against the risks that pose the greatest potential harm. As an added service, you might try to educate your clients about how to avoid becoming the next cybercrime statistic.
Three simple rules will do most of the heavy lifting. 1) Never click on links in unsolicited emails, SMS messages or WhatsApp messages. 2) Never share your credit card details, bank access PIN or passwords, or one-time PINs (OTPs) with anyone, not even someone claiming to be from the bank. And 3) always verify suspicious requests through your bank’s official app, call centre or website, not by using the contact details or URL contained in a dodgy email or text.
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