COSATU statement on the South African Reserve Bank’s failure to lower interest rates

23 July 2021

The Congress of South African Trade Unions (COSATU) is disappointed by the South African Reserve Bank’s failure to lower the repo rate significantly in the face of a sluggish economy. 

Whilst we acknowledge the fact that the Reserve Bank has cut the repo rate to a four-decade low, we remain adamant that the SA Reserve Bank cannot afford to continue consider broader economic development imperatives that includes employment creation. The reserve bank’s monetary policy is a critical instrument for development and must be linked to monetary policy for developmental and redistributive processes.

In addition to targeting employment, the reserve bank should align its policy to industrial development and impose quantitative controls on commercial banks to ensure that a quarter of their loans go to productive lending. 

This is a cruel slap in the face to millions of workers, consumers and businesses struggling to survive amid the worst recession in a century and an unprecedented global pandemic.  It is mind boggling that the SARB failed to lower the repo rate a week after the devastation unleashed on workers, businesses and consumers in KwaZulu-Natal and Gauteng; two provinces that constitute over 50% of the economy.

Inflation has been steady, decreasing and well within the SARB’s target range and many economists foresee further declines in the CPI. 

A repo rate cut would have provided badly needed and immediate relief to workers, consumers and businesses struggling to feed their families, pay their debts and keep afloat.  It would have injected significant stimuli into the economy at a time when there is not enough room for fiscal stimulus.

This would have given a well-timed boost to efforts to save and create jobs, rebuild the economy, and attract investments.

What the SARB has done is to remind workers they are on their own and the nation’s Reserve Bank is oblivious to the needs of the real economy but is obsessed with massaging the interests of lenders and bondholders

The ANC would do well to implement its resolution that calls for the adjustment of the mandate of the Reserve Bank. The mandate cannot just be not limited to keeping inflation under control only, but it also focuses on supporting economic growth and job creation too.

Interest rates and credit allocation must promote a redistributive agenda. Through redistributing the social surplus from financial speculators and rentiers to industrialists through concessionary finance, quantitative controls on the financial sector and management of the exchange rate, inserting tax- frictions on financial transactions, monetary policy will support industrial development

A redistributive monetary policy will also support housing and developmental infrastructure finance. Monetary policy must be co-ordinated with fiscal policy and must be geared towards support for an expansionary fiscal stance.

Issued by Sizwe Pamla, National Spokesperson, COSATU, 23 July 2021