NEWS & ANALYSIS

Reduction of interest rates not a magic wand – COSATU

Federation happy that SARB has responded in a bold and decisive manner

COSATU statement on the reduction of the interest rates by the SARB

19 March 2020

The Congress of South African Trade Unions welcome the decision by the South African Reserve Bank`s Monetary Policy Committee (MPC) to cut the repo rate by 100 basis points from 6.25% to 5.25%. The Federation is happy that the SARB has responded to our call for boldness and decisiveness during this difficult period.

While this is not a magic wand that will fix all of our problems; it is a step in the right direction that will play a role in trying to stop the economy plunging into a full-scale depression.

This would hopefully provide immediate relief to all households and industries, and with a bit of luck jolt the economy. The commercial banks now need to play their role by reducing the interest rate, offering a one (1) to three (3) month loan payment deferment holiday for all loans, in particular for working- and middle-class families and at-risk companies and industries.

We acknowledge that price stability is important as long as we currently depend on capitalists for job-creation and growth. Unfortunately, in the current reality that is dominated by finance capital, higher inflation rate suggest structural imbalance and it becomes an impediment for investors in productive sectors, including our own companies as they become hesitant to invest if they are sure that the value of that investment is going to plummet.

As workers, we endorse this decision by the Reserve Bank because our position is that its approach should incorporate both the developmental imperatives and also protect the currency. These are mutually reinforcing rather than contradictory. 

The reserve bank also needs to impose quantitative controls on commercial banks to ensure that a significant portion of their loans go to priority sectors that drive the growth path and save and create jobs. Employers also need to put opportunism aside and stop being trigger happy with retrenchments. Companies should not use the crisis to implement retrenchment plans that were in the pipeline while enjoying the economic interventions necessitated by the crisis. The Federation hopes for a further rate cut in the next meeting of the SARB MPC 

Issued by Sizwe Pamla, National Spokesperson, COSATU, 19 March 2020