The South African Reserve Bank’s (SARB) decision to hold interest rates provides a necessary reprieve to small businesses servicing debt. This is according to Lee Bromfield, CEO of Core Lending at FNB Business.
“Even though the decision to hold interest rates comes with a cautionary, it provides small businesses a small window to potentially make ground in reducing debt before the next monetary policy meeting. The objective should be to reduce it as much as possible to prevent falling behind in light of a potential rise in interest rates,” he said.
Recently, the South African small business sector received a vote of confidence when the government established a Ministry of Small Business Development. The move arguably positions small business sector as one of the catalysts to the country’s economic growth.
Shortly after the good news, the need to urgently boost small business was highlighted by lackluster Gross Domestic Product numbers released by Statistics South Africa (Stats SA). Even though economic analysts had predicted less than desirable GDP numbers, the Stats SA findings have certainly raised concerns about the future of the country’s economy, as well as the outlook of vulnerable sectors, of which small business is one.
Currently, there are no immediate signs of an imminent economic resurgence as inflation continues to rise, increasing the likelihood of a rate hike in the near future. The Reserve Bank has already cautioned that rising inflation is posing a serious challenge to an attempt to keep interest rates low.
“The only option at this stage is to ‘tighten the belt’ by containing costs and cutting unnecessary debt. Getting rid of needless debt within a short period of time should be a key priority for any small business,” concludes Bromfield.
To download the podcast on “Use interest rates reprieve to reduce your small business debt https://soundcloud.com/fnbsa/lee-bromfield-reduce-small-business-debt-through-interest-rate-reprieve-podcast
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