Sarb’s move not to increase repo rate a ‘sober decision’ – Cosatu
Union says this will provide breathing space for an economy battered by a global pandemic and a myriad of crises.
The Congress of South African Trade Unions (Cosatu) has welcomed the Reserve Bank’s (Sarb) decision to not increase the repo rate.
The trade union called this a “sober decision”, saying it would provide breathing space for an economy battered by a global pandemic, a recession, unprecedented levels of load shedding, cable theft, and a myriad of other crises.
The repo rate will remain at 8.25% per year after three members of the Sarb’s Monetary Policy Committee voted to keep rates on hold, while two members preferred an increase of 25 basis points.
“A decision to increase the repo rate would have been an unnecessary and cruel blow to millions of indebted working-class families and the economy. High interest rates raise the cost of living for everyone who is repaying a loan,” said Cosatu.
Inflation begins to dissipate
Cosatu said, as inflation begins to dissipate, the Sarb will need to start lowering the repo rate to help stimulate the economy and reduce unemployment.
According to the union, the high interest rates will continue to deter thousands of small businesses from raising capital to expand current businesses or setting up new ones.
“This is a serious factor which contributes to the slowdown in economic growth and the slow rate of new job creation. The expansion of the manufacturing sector will remain an illusion as companies cannot afford to borrow money from the banks to expand their operations and create more jobs.
“Treasury needs to take full responsibility for this crisis and action drastic steps to provide the necessary relief to the economy. The economy cannot afford for the Sarb to continue with a staggeringly high repo rate to manage an inflation rate whose causes are external, namely the war in Ukraine, load shedding, and the high price of oil,” said Cosatu.
Key measures government can take
Cosatu suggested the following key measures to protect the economy and provide relief to workers:
- Lower the taxes that consume 28% of the fuel price, including placing the Road Accident Fund (RAF) under administration and tabling the RAF and Road Accident Benefits Scheme Bills at Parliament to set it on a path where it lessens its dependence on an unaffordable fuel levy.
- Provide more support and relief to Eskom to end its addiction to double-digit tariff hikes year after year.
- Drastic interventions at Transnet and Metro Rail to ensure food and other goods and passengers can reach their destinations safely, affordably, and timeously.
- Reduce the price of 10 essential food items through VAT exemptions by the Treasury and the waiving of markups by retailers.
- Adjust the social relief of distress grant for the inflationary erosion that has weakened its ability to cushion the poor.
- Extend the Presidential Employment Programme to accommodate at least 1 million active participants by the November Medium Term Budget Policy Statement and 2 million by the February Budget Speech.
- Expedite the long-awaited Two Pot Pension Amendment Bills to allow highly indebted workers early access to their pension funds.
- Develop a package of measures to help struggling consumers and SMMEs cope and spur economic growth and job creation.
- Ramp up a more aggressive buy-local campaign to support local industries and ensure the economy is less dependent on imports across the value chains.
- Revoke the reckless austerity freeze on infrastructure investments critical to stimulating the economy and rebuilding public services.
“It is clear to all properly adjusted persons the status quo cannot be allowed to continue. Workers need decisive action by the state and private sector if we are to turn South Africa around,” said Cosatu.