The decision to increase interest rates by the Reserve Bank is reckless
The Congress of South African Trade Unions condemns the reckless decision by South African Reserve Bank’s Monetary Policy Committee to increase the interest rates by 0,25 % given the weak economy and low inflation.
This will hurt the workers by reducing whatever little money they have. The workers in this country are already struggling with the escalating prices of energy, food, transport, education and healthcare. This will result in more home repossessions and also defeats the aims and goals of the recently introduced maximum interest’s rate for all types of credit agreements.
The Reserve Bank has increased the interest rate out of fear that the inflation might increase and because of the Rand's depreciation. Inflation is steady and at 4.7% well below the 6% target limit. The Rand has depreciated because the US economy is growing and its unemployment rate is falling.
By this decision the Reserve Bank has thus decided to punish working and middle class South Africans, who are already battling to make ends meet.
This calamitous decision will only serve to increase the worker’s heavy debt levels, reduce expenditure and consumption further stifling economic growth and job creation. Given that the inflation levels have steadily remained below 6%, this was a missed opportunity by the SARB to in fact reduce the prime rate to provide relief to workers and stimulate the economy.They were supposed to cut interests at this stage with a weak, fragile economy hovering below 2% growth rates and one which has been shedding jobs across sectors. This makes a mockery of the government’s commitment to job creation.
The much needed investment in the economy will remain a pipedream because, companies will be reluctant to borrow more money to invest in their businesses and therefore create jobs. This hard-line approach by the committee is tantamount to economic sabotage, because it will also keep small businesses away from borrowing in order to expand their operations.
COSATU demands that government intervene to ensure that the Reserve Bank stops increasing interest rates unilaterally and without reasonable reasons. It is ridiculous that their only answer and solution to the socio-economic problems of the country, has been to increase the debt levels of an already over indebted working class.
Government and Treasury must stop this anti-worker policies and learn from the Obama administration. The reason why the US economy is growing and has cut unemployment to less than 5% is because they pursued an aggressive government driven investment and infrastructure economic recovery programme.
This irresponsible decision is likely to exacerbate an already worse situations of job losses. These companies will have an excuse now to proceed with their retrenchments. We reiterate our longstanding call for the nationalisation of the South African Reserve Bank. They are not working in the interest of South Africans and they care very little about the poverty and unemployment levels faced by the country
Statement issued by Sizwe Pamla, COSATU national spokesperson, 19 November 2015
