The Prescribed Rate of Interest: What You Can Charge, and From When

A client has not paid a R180,000 invoice for fourteen months. A contractor walked off a job with your deposit. A court awarded you damages and the other side is in no hurry.

In all three cases you are entitled to interest, and in none of them did anyone agree a rate with you. South African law fills that gap with a single formula, and the two questions that decide what you actually recover are what rate and from when — with the second one usually worth more than the first.

The rate is the repo rate plus 3,5

Section 1(1) of the Prescribed Rate of Interest Act 55 of 1975 sets the default:

"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."

And subsection (2)(a), substituted by the Judicial Matters Amendment Act 24 of 2015:

"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."

Which puts the prescribed rate, right now, in the middle of a change.

The Reserve Bank raised the repo rate to 7,25% with effect from 25 September 2026. Under the timing rule in the next subsection, that does not reach the prescribed rate immediately. So:

If you are calculating interest that runs across those dates, it does not all accrue at one rate. You can check the underlying repo movements against our prime and repo rate history.

Read the first sentence of section 1(1) again, because it is doing most of the work. The prescribed rate is a default. It applies only where no other law, agreement or trade custom governs the rate. So:

• If your contract sets a rate, that rate applies. The prescribed rate never overrides an agreed one.
• If the debt is a credit agreement under the National Credit Act, the NCA's caps govern instead — an entirely different set of ceilings, which we cover in our guide to the maximum interest rates and fees a credit provider may charge.
• If your standard terms say "interest at prime plus 2%" on overdue accounts, that is your agreement, and the prescribed rate is irrelevant.

The prescribed rate is what you fall back on when nobody thought about it — which, for most unpaid invoices between businesses, is exactly what happened.

When the rate changes, and why the gazette is not the trigger

Section 1(2)(b) requires the Minister of Justice to publish the amended rate in the Gazette whenever the repo rate is adjusted. Section 1(2)(c) then sets the timing:

"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."

Two consequences, and both trip people up.

There is a lag, and you can watch it happening. The Reserve Bank raised the repo to 7,25% on 25 September 2026. The prescribed rate did not change on 25 September, and it will not change on 1 October. It changes on 1 November 2026 — the first day of the second month following the month of the decision.

The same arithmetic produced the current rate: a 29 May 2026 decision took effect on 1 July 2026.

So a creditor calculating interest today should be using 10,50%, and diarising 1 November. Budget the calculation around the statutory date, not around the announcement.

The gazette notice follows the change; it does not cause it. The rate moves by operation of section 1(2)(a) when the repo moves. The Minister's notice records it. In practice those notices are published late, and sometimes not at all, which produces a specific and expensive mistake: someone searches for "the prescribed rate of interest", finds the most recent gazette, and uses a rate that expired two repo decisions ago.

How stale can it get? The Department of Justice's own consolidated copy of the Act carries a footnote to section 1(2) that reads: "11,75% per annum with effect from 1 July 2023 – GN 4075 in GG 49720 of 17 November 2023." That footnote is on the official text today, and it is more than three years out of date.

To work out the rate for any past period, take the repo rate that applied at the time, add 3,5, and remember that the change took effect on the first day of the second month after the Reserve Bank's decision. Because section 1(1) fixes the rate "as at the time when such interest begins to run", a debt that started running interest in 2024 generally keeps the rate that applied then — it does not float with later repo decisions.

The harder question: from when does interest run?

This is where most claims lose money, and it turns on what kind of debt you have.

Liquidated debts — an unpaid invoice, a loan, a fixed sum

Interest runs from the date the debt became due. If your invoice was payable on 30 days and it was not paid, interest starts when the 30 days expired. Nothing more is required; the amount is certain, the date is certain, the clock runs.

Unliquidated debts — damages, a claim that has to be quantified

Section 2A deals with these, and it is the section worth knowing by heart. Subsection (2)(a):

"Subject to any other agreement between the parties and the provisions of the National Credit Act, 2005, the interest contemplated in subsection (1) shall run from the date on which payment of the debt is claimed by the service on the debtor of a demand or summons, whichever date is the earlier."

So for a damages claim, interest does not run from the date of the breach, or the date of the accident, or the date you first complained. It runs from the earlier of a demand or a summons.

That single word "demand" is defined in section 4:

"'demand' means a written demand setting out the creditor's claim in such a manner as to enable the debtor reasonably to assess the quantum thereof."

A phone call is not a demand. An email saying "please sort this out" is not a demand. A letter saying "you owe us damages" without figures is not a demand, because it does not let the debtor reasonably assess the quantum. A letter that sets out what happened, what it cost, and how the number was arrived at, is a demand — and it starts the interest clock, possibly years before a summons is issued.

On a R500,000 claim that is roughly R52,500 a year at 10,50%, and about R53,750 a year once the rate moves to 10,75% on 1 November 2026. A properly drafted letter of demand sent eighteen months before litigation is worth somewhere around R80,000 more than a vague one. Our guide to writing a letter of demand and using the small claims court covers the mechanics; this is the reason the wording matters beyond mere politeness.

Three qualifications in section 2A:

• Future loss does not start early. Section 2A(3): interest on the part of a debt consisting of the present value of a loss that will occur in the future does not begin to run until the quantum is determined by judgment, arbitration or agreement.
• A payment into court or a tender stops the clock. Section 2A(4): where a debtor offers to settle by paying into court or making a tender, and the creditor accepts it, or a court awards no more than that amount, the running of interest is interrupted from the date of the payment or tender.
• A court can order otherwise. Section 2A(5): a court, arbitrator or arbitration tribunal may make such order as appears just about the rate and the date from which interest runs. The default is a default, not a ceiling on judicial discretion.

Judgment debts

Section 2(1):

"Every judgment debt which, but for the provisions of this subsection, would not bear any interest after the date of the judgment or order by virtue of which it is due, shall bear interest from the day on which such judgment debt is payable, unless that judgment or order provides otherwise."

Section 2(3) defines a judgment debt as a sum due in terms of a judgment or order, including an order as to costs — so your taxed costs bear interest too — but excluding any interest not forming part of the principal sum. And section 2(2) lets that interest be recovered as if it formed part of the judgment debt itself, which matters for enforcement.

What this means in practice

If you are owed money on an invoice, you are entitled to add interest at the prescribed rate from the date it fell due — 10,50% to 31 October 2026, 10,75% from 1 November — without needing anything in your contract to say so. Say so on the statement. Most debtors do not know this, and the arithmetic changes the conversation.

If you are claiming damages, send a proper written demand as early as you can, with figures and the working behind them. The difference between a vague letter and a quantified one is measured in years of interest.

If you have a judgment, interest runs on the capital and on the costs order from the day the debt is payable, and it compounds your leverage the longer the other side delays. It does not, however, run on interest — only on the principal sum.

If you are a credit provider, none of this applies to your credit agreements. The NCA governs, with its own caps and its own in duplum rules.

And in every case, check the rate against the repo rate rather than against the last gazette notice you can find.

Frequently asked

Is the prescribed rate the same as the prime rate? No — and right now they are visibly different, which is the best illustration available.

Both sit 3,5 percentage points above the repo rate, so they usually carry the same number. But they get there by different routes. Prime is what banks charge their best customers and it moved with the repo on 25 September 2026, to 10,75%. The prescribed rate is set by section 1(2)(a) and delayed by section 1(2)(c), so it is still 10,50% until 31 October.

For five weeks, prime and the prescribed rate are a quarter of a percentage point apart. Anyone who reached for the prime rate as a shortcut during that window would be overstating a claim. Never assume one from the other.

My contract says nothing about interest. Can I still charge it? Yes. That is precisely the gap section 1(1) fills.

Can I charge interest on the interest? No. Section 2(3) excludes interest not forming part of the principal sum from the definition of a judgment debt, and the common-law in duplum rule separately caps arrear interest at the amount of the outstanding capital.

Does interest keep changing as the repo moves? Generally no. Section 1(1) fixes the rate "as at the time when such interest begins to run". A debt that started running interest under an earlier rate keeps that rate.

The debtor says they never received my demand. Does the clock still start? Section 2A(2)(a) turns on service of the demand on the debtor. Send it in a way you can prove — and if in doubt, the summons is the fallback date.

Is this different from what a debt collector can add? Yes. Debt collectors are separately regulated, and there are limits on what they may charge over and above the debt. See debt collector fees and your rights and our comparison of collecting your own debt versus hiring a collector.