Numsa Response to SARB's Monetary Policy Committee

15 May 2011

The National Union of Metalworkers of South Africa (Numsa) has noted the Monetary Policy Committee (MPC) statement issued by the Reserve Bank on Friday 12 May 2011. Unsurprisingly, the MPC‘s stance on maintaining inflationary figures within the targeted range has not changed.

According to the MPC, the inflation outlook continues to deteriorate, with the year-on-year inflation rate in urban areas increasing to 4.1% in March 2011; up from 3.7% in February.

The main drivers behind this increasing inflation rate are the significant price increases that have been experienced in fuel, electricity and food. Food inflation has increased by a significant 1.6% just in the last two months while petrol and electricity prices have increased by a whopping 16.9% and 19.3% respectively.

These increases in the prices of goods which feature prominently in the basket of goods demanded by workers, only serve to put more pressure on workers' wages, which are already severely constrained.

Numsa therefore challenges the insinuation made by the MPC that unit labour costs and increases, by virtue of being marginally above inflation, are contributing to the unfavourable employment environment, and by extension, to the slow economic growth. These increases come off a very low base, and workers are still forced to live hand to mouth, even after these meagre increases have been effected.

While Numsa is encouraged by the MPC's decision to keep interest rates unchanged, we maintain that this approach is too conservative given the increased cost pressures on the incomes of all South Africans.The Reserve Bank has to begin moving towards a policy stance which focuses on supporting job creation and improved living standards.

Instead, the MPC boldly continues to insist that they will not hesitate to respond to signs that threaten to move inflation out of the targeted range. Numsa believes that this short-sightedness and inflexibility by the MPC only serves to further undermine the broader government economic growth objectives.

Numsa reiterates its call for the nationalisation of the Reserve Bank in sync with our objectives of building a new economic trajectory geared towards building people's economy for people's power.

Statement issued by Neo Chabane, NUMSA Chief Economist, May 15 2011

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