The Judicial Matters Amendment Act, No 24 of 2015, (commenced on 8 January 2016) has amended s1 of the Prescribed Rate of Interest Act, No 55 of 1975.
Section 1 of the Prescribed Rate of Interest Act, No 55 of 1975, as amended, stipulates that:
Rate at which interest on debt is calculated in certain circumstances
- If a debt bears interest and the rate at which the interest is to be calculated is not governed by any other law or by an agreement or a trade custom or in any other manner, such interest shall be calculated at the rate contemplated in subsection (2)(a) as at the time when such interest begins to run, unless a court of law, on the ground of special circumstances relating to that debt, orders otherwise.
- For the purposes of subsection (1), the rate of interest is the repurchase rate as determined from time to time by the South African Reserve Bank, plus 3,5 percent per annum.
- The Cabinet member responsible for the administration of justice must, whenever the repurchase rate is adjusted by the South African Reserve Bank, publish the amended rate of interest contemplated in paragraph (a) by notice in the Gazette.
- The interest rate contemplated in paragraph (b) is effective from the first day of the second month following the month in which the repurchase rate is determined by the South African Reserve Bank.
- For purposes of this section:
- “repurchase rate” means the rate at which banks borrow rands from the South African Reserve Bank; and
- “South African Reserve Bank” means the central bank of the Republic regulated in terms of the South African Reserve Bank Act, 1989 (Act No. 90 of 1989).
From 8 January 2016 the prescribed rate of interest is no longer a fixed rate but will be the repurchase rate, determined from time to time by the South African Reserve Bank (SARB), plus 3,5%.
Given that the prescribed rate of interest is linked to the repurchase rate and is no longer fixed, it is important for a litigant to confirm that the most recent and correct prescribed rate of interest is used when instituting legal proceedings which include a claim for interest. The rate will not fluctuate after the date that proceedings have been instituted as confirmed in Davehill (Pty) Ltd & Others v Community Development Board  1 All SA 388 (A), where it was held that the rate is fixed at that time and remains constant in respect of those proceedings.
Whenever the repurchase rate is adjusted by the SARB, the Cabinet member responsible for the administration of justice is required to publish the amended prescribed rate of interest by notice in the Gazette.
The most recent publication appeared in Government Gazette No. 397895 on 4 March 2016, under s1(2)(b) of the Prescribed Rate of Interest Act, No 55 of 1975, wherein the Minister of Justice and Correctional Services published a rate of interest of 10,25% per annum as from 1 March 2016 for the purposes of s1(1) of the said Act.