In short
Private lending returns are interest, and in South Africa they are usually quoted in relation to prime — the benchmark lending rate, which moves with the Reserve Bank’s repo rate. Typical market ranges sit meaningfully above what a bank deposit pays and meaningfully below what equity investors hope for, which is exactly what you would expect from an asset whose return is a repayment rather than a bet. The arithmetic is plain: capital × rate = annual interest, divided by twelve for a monthly figure. What varies is the rate, and what varies the rate is the borrower.
01 — The arithmetic
The arithmetic, first
Before any range is useful, the method has to be clear, because it is the part that does not change.
Interest on a lending arrangement is capital multiplied by the rate. A placement of R1 000 000 at 12% a year produces R120 000 of interest in a year, or R10 000 a month. At 14% the same capital produces R140 000, or R11 667 a month. There is no compounding to model if the interest is paid out, and no growth assumption to argue about.
Illustrative arithmetic to show the method. Not a quoted rate, not an offer, and before tax.
That is why the whole question collapses into a second one: what rate, and why that rate.
02 — The benchmark
Why everything is quoted against prime
South African lending rates orbit prime. Prime is the benchmark rate banks charge their best customers; it sits a fixed margin above the Reserve Bank’s repo rate, so when the Monetary Policy Committee moves the repo rate, prime moves with it and everything priced off prime moves too.
Private lending rates are commonly expressed as prime plus a margin. That is not a presentational choice — it is what makes the return legible. A rate of “prime plus 4” tells you how the arrangement behaves when rates change; a flat “13%” does not.
Benchmark
Prime lending rate
Set by
Moves with the SARB repo rate
Typically quoted
Prime plus a margin
Why
It says how the return behaves when rates move
The practical consequence: in a rate-cutting cycle a prime-linked return falls, and in a hiking cycle it rises. That cuts both ways and it is a feature of the instrument rather than a flaw in it. Anyone quoting a rate should be able to tell you whether it is linked or fixed, and what happens at the next MPC meeting.
03 — The range
What typical market ranges look like
Private lending in South Africa typically pays more than a fixed deposit and less than the long-run return people hope for from equities. That is the whole positioning, and it is a consequence of the mechanism rather than a marketing claim: a lender is paid for the use of money and for the risk that it is not repaid, and that price sits between a guaranteed deposit and an ownership stake.
| Where the return comes from | How it behaves | |
|---|---|---|
| Bank deposit | Interest, on demand or fixed term | Lowest, most certain, capital protected by the bank |
| Private lending | Interest on loans, as they repay | Higher, steadier than markets, not guaranteed |
| Listed equities | Profits and what a buyer will pay | Most variable, no defined return |
Ranges move with the cycle, so a figure quoted eighteen months ago may bear little relation to what is available now — and that is the case for asking what the rate is today rather than reading one off an article. These are typical market ranges, not fixed figures.
04 — The deductions
What comes off before it is yours
A quoted rate is a gross rate. Two things stand between it and what reaches your account.
- Tax. Interest is taxable income in South Africa at your marginal rate, subject to the annual interest exemption. It is not a dividend and it is not a capital gain, so neither of those regimes applies.
- Timing. Capital that is between placements is not earning. A return quoted annually assumes the money is working for the year.
Neither is a hidden cost; both are arithmetic. But a monthly figure worked out from a gross rate is a gross figure, and it is worth knowing which one you are looking at before making plans around it.
05 — Where ProLend fits
Where ProLend fits
ProLend distributes private lending arrangements in South Africa; the lending is administered by BC Funding Solutions, a registered credit provider (NCRCP 11132, FSP 55147). ProLend is not the lender and does not give advice.
The calculators here take a capital amount and a current rate and show the monthly and annual interest, so the number you are looking at is yours rather than an illustration. Figures are indicative, not guaranteed and not an offer.