Reserve Bank Governor Tito Mboweni has cut the repo rate by 100 basis points.
The Monetary Policy Committee made the decision after meeting over the past two days.
Earlier, Statistics South Africa released the Producer Price Inflation figure for April ? something which was believed to have reinforced the case for a rate cut.
The price of products at the factory gates slowed to 2.9 percent year-on-year for April.
This was down from 5.3 percent in March. On Thursday, COSATU General Secretary Zwelinzima Vavi said the employment prospects for South Africans were frightening in light of the economic crisis.
Speaking at a National Union of Mineworkers conference, he called on government to use more expository economic policies to stimulate job creation.
He said the fact that both the mining sector, which was affected by events overseas, and the construction sector, which depended on domestic demand, were suffering meant economic policies needed to be rethought.