Cash is not “free” – even when rates fall

Yes, leaving cash in the bank earns less when rates come down, but using working capital to buy assets outright still carries a real cost: the return you could have earned by using that cash elsewhere in the business.

As prime has edged down after the SARB’s 0.25% cut, it’s a positive shift, but we’re still in a high-cost environment, repo at  6.75% and prime at 10.25%. Inflation is sitting close to 3–3.5%, but a soft rand and external shocks limit how fast rates can fall. Expect slow, irregular cuts rather than a trend you can bank on.

What this means for business

Cash purchases still drag on liquidity.
Even with the cut, paying upfront locks capital into depreciating assets. In a low-growth economy, cash on hand often delivers higher value than ownership.

Loans haven’t become “cheap”.
Anything priced off prime will ease only marginally. A single inflation surprise or rand wobble can reverse the recent gain. Banks may also shift pricing if your risk score changes.

Rentals stabilise cash flow and reduce rate exposure.
Turning CAPEX into OPEX gives predictable costs and removes most of the rate volatility. It also supports regular tech or equipment refresh cycles, which matters in fast-moving sectors like ICT and medical.

How to decide

Focus on three points:

1. Your actual cost of capital after margins, fees, and opportunity cost.
2. The asset’s useful life, not the theoretical depreciation period.
3. Your appetite for future rate shocks as cuts remain slow and uncertain.

Bottom line

A 0.25% drop is helpful but not game changing. Buyers who stick to cash purchases risk tying up working capital just as conditions stay unpredictable. Rentals and structured finance give you steady cash flow, lower risk, and the flexibility to adjust as the rate cycle drifts slowly in your favour.