Interest on late payments in South Africa: the prescribed rate

Late payment is one of the biggest headaches for small businesses in South Africa. The good news is that the law gives you more to work with than many people think. You can agree an interest rate with your client, and if you didn't, the Prescribed Rate of Interest Act supplies one. The limits come from the common law and, for consumers, the National Credit Act.

This guide covers agreed interest, the prescribed rate and how it moves, the in duplum rule, the rules for consumer clients, government payment times, and practical ways to get paid faster. The free invoice generator puts a clear due date and your payment details on every invoice.

Agree your terms up front

With a business client, you can agree a late-payment interest rate in your contract, quote or terms of trade. Agree it before the work starts, then repeat it on every invoice, so it's clear when a payment became late and what it costs. For example:

Interest at 12% a year may be charged on overdue accounts, as set out in our terms of trade.

Invoice Native doesn't add an interest clause by itself. If you've agreed one, type it in the invoice notes.

No agreed rate: the prescribed rate

If no rate was agreed, interest on a late debt can run at the prescribed rate, under the Prescribed Rate of Interest Act 55 of 1975. It runs from the due date, or from when you demand payment.

Since 2016, the prescribed rate has been the South African Reserve Bank's repo rate plus 3.5 percentage points. When the repo rate changes, the prescribed rate follows on the first day of the second month after the Reserve Bank's decision. No separate notice is needed.

The Reserve Bank raised the repo rate to 7.25% on 25 September 2026, which is why the rate rises on 1 November. The rate that applies is fixed when interest starts to run, so a debt that fell due in October 2026 stays at 10.50% even after the change.

For a rough idea: a year's interest at 10.50% on R20,000 is R2,100, so 60 days late costs your client about R345.

The in duplum rule

South Africa's common law has a limit called the in duplum rule: interest stops running once the unpaid interest equals the outstanding capital. On a R10,000 debt, unpaid interest can't grow past R10,000. It's one more reason to chase late invoices early rather than letting interest build up.

Consumers and the National Credit Act

Charging interest or a fee when a consumer pays late turns your invoice into an incidental credit agreement under the National Credit Act. Only parts of the Act apply, but the key ones matter:

• you may charge interest or fees only if they were disclosed and accepted beforehand, for example in a signed quote or terms;
• the maximum rate for incidental credit is 2% a month, with no initiation fee, under the limits published in GN R1080 in 2015;
• the agreement counts as made 20 business days after the late fee or interest is first charged;
• the Act's own in duplum rule caps default charges at the unpaid balance.

The Act doesn't cover larger juristic persons, such as companies above its size threshold. For consumers, though, never add interest that wasn't agreed upfront.

The Consumer Protection Act also prohibits unfair, unreasonable or unjust terms. Heavy penalty clauses buried in standard terms are a risk, so keep late charges simple and fair.

Government clients

Government departments covered by the Public Finance Management Act must pay within 30 days from receipt of an invoice, unless the contract says otherwise, under Treasury Regulation 8.2.3. Municipalities must also pay within 30 days, under section 65 of the Municipal Finance Management Act. National Treasury publishes reports on departments that don't.

Government buyers usually want your Central Supplier Database (CSD) number and their order number on the invoice. Add both in the invoice notes so your invoice isn't sent back.

Get paid faster

• Send the invoice the day the work is done, with a clear due date. Thirty days is common for businesses, and on receipt for consumers.
• Know what "30 days from statement" means. Your client pays 30 days after the end of the month: an invoice dated 1 October isn't due until 30 November. Invoice Native offers it as a payment term, but shorter terms get you paid sooner.
• Make paying easy. Give your EFT details (bank, account holder, account number, branch code and account type), and ask for the invoice number as the reference. Add a PayShap ShapID, usually your cellphone number, so clients can pay instantly. With PayShap, the payer sees your name before paying.
• Follow up politely on the due date, then again a week later.

Protect your clients from banking-details fraud

Scammers send fake invoices or letters "changing" a supplier's banking details. SABRIC, the banking industry's risk centre, warns customers to verify any change of banking details by phoning a known number, not the one on the letter, and to watch for look-alike email addresses, such as .com instead of .co.za.

Invoice Native adds a payment note to every South African invoice: "Please use [invoice number] as the payment reference. Our banking details will never change by email — please confirm by phone before paying."

Checklist

• ✅ Payment terms and any interest agreed before the work starts
• ✅ A due date on every invoice
• ✅ No agreed rate? The prescribed rate: 10.50%, or 10.75% from 1 November 2026
• ✅ Interest stops once it equals the unpaid capital
• ✅ Consumers: only agreed charges, at most 2% a month
• ✅ EFT details, PayShap and a banking-details warning on the invoice

This isn't legal advice. For a large or disputed debt, talk to an attorney or accountant.