The theory of relativity applies to interest rates as much as it does to time and length.

Pensioners who have seen interest rates fall one percentage point over the past year - equating to a 13% drop in the central bank's repo rate from 7.5% to 6.5% - may feel a lot poorer but, according to economists who view "real interest rates" as the gap between inflation and quoted interest rates, they are actually better off now.

With July's consumer inflation coming in at a better than expected 3.7%, and considering that the central bank's repo rate has remained flat at 6.5% since March, the real interest rate widened to 2.8% in July.

In May 2009, savers might have felt richer earning 7.5% interest, but with inflation at 8%, the purchasing power of their savings was shrinking because the real interest rate was -0.5%.

While the steady climb in real interest rates is good news for savers, Investec economist Annabel Bishop blames it for our currency making South Africa's products uncompetitive on international markets.

In a research note titled "SA's unchecked climb in real interest rates drives rand strength", Bishop included a table ranking this country joint third with Russia for having the world's highest real interest rates.

The table used June figures when our real interest rate was 2.3%, so SA may now have overtaken Australia, which was in second place with a real interest rate of 2.7%. Brazil ranked first with a real interest rate at 5.9%.

India's savers have the world's worst deal, with a real interest rate of -7.7% a year, followed by Hong Kong with -2.5%, and then the UK with -2.4%.

Bishop blamed SA's increasingly attractive interest rates for the rand's inability to weaken below R7.20 to the US dollar.

Widening real interest rates have seen local bonds attract R4.6-billion of foreign funds. But worsening economic prospects due to the strong rand have seen a R2.4-billion outflow as foreigners sell JSE shares.

Bishop says: "With real interest rates high and climbing in SA on the back of falling inflation, the rand is likely to strengthen further without a 50 basis point cut in interest rates in September.

"But we expect the Reserve Bank will avoid this by cutting interest rates by 50 basis points at its next monetary policy committee meeting on September 9, pushing the domestic currency back into the territory of R7.50 to R7.60 per US dollar for the remainder of third quarter.

"This will be a temporary hiatus for the rand however: in the fourth quarter the seasonal effect will likely kick in, driving the currency towards the R7.00 per US dollar mark - although forex reserve accumulation by the authorities may again manage to keep it from convincingly piercing R7.20 per dollar."

Bishop argues the 2.8% real interest rate justifies not only a cut of the repo rate down to 6% in September, but then another cut to 5.5% in November.

Indebted households and manufacturers clamouring for a weaker rand look increasingly likely to get the cut they want on September 9.