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Amendment to the Prescribed Rate of Interest Act.

The prescribed rate of interest which is claimed on debts outstanding is governed by the Prescribed Rate of Interest Act 55 of 1975 (the “Act”). Until recently the gazetted rate of mora interest under the Act (being the rate of interest levied as general damages which result from a failure to pay a debt due) was set at 15.5% from 1993 up until 2014 and at 9% from 2014 until now. This mora rate is that which is claimed when issuing summons or other proceedings for the recovery of a debt due where another rate of interest is not set by way of agreement between the parties.

The Act has however been amended effective 8 January 2016 and the mora rate is no longer a fixed rate but is now linked directly to the repurchase rate (the repo rate), the mora rate of interest is now calculated at the repo rate plus 3.5%, as per Section 1 read together with Section 2(a)1 of the Act.

When the Reserve Bank changes the repo rate, the new prescribed rate of interest becomes effective from the first day of the second month following the month of the repo rate announcement. This change will affect the interest that a party may claim on a debt in legal proceedings, which rate as of March 2016 is 10.25%.

 

Prompt Payment Regulations – Update as at 27 January 2016

The period for public comment on Construction Industry Development Board (cidb) Prompt Payment Regulations Government published in Government Gazette on 29 May 2015 (in Notice 482 of 2015) expired at the end of July 2015.

After a period of vigorous public comment, assimilation of the public comment received into an updated version of the Prompt Payment Regulations, the updated Prompt Payment Regulations have been approved by the cidb board.

The Prompt Payment Regulations are presently being reviewed by the Department of Public Works and Treasury for conflict with existing legislation.

We are hoping the Prompt Payment Regulations will be signed into law by the Minister of Public Works during 2017.

Click here to view the Government Gazette Notice 482 of 2015.

Click here to view the MDA commentary on the Prompt Payment Regulations.

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