COSATU welcomes the SA Reserve Bank’s decision to cut the repo rate by a further 100 basis points. This is in line with COSATU’s submission in a memo to the cabinet as well as engagements at Nedlac through the Covid-19 response task team for more interventions by the bank to ease the burden on consumers and the economy. We expect the benefits of this repo rate cut translate to changes in the interest rate so that they reach consumers faster.
The SARB needs to continue to act and further reduce the rate by a further 75 points in the next meeting of the Monetary Policy Committee. As workers, we favour an inclusive monetary policy that incorporates both the developmental imperatives and also protects the currency. These are mutually reinforcing rather than contradictory.
Now that the SARB is gradually acting to provide support to commercial banks and introduce liquidity into the economy; it is critical for all commercial banks and lenders to now come to the party.
The initial efforts to provide relief by commercial banks represent a step in the right direction, but these measures do not go far enough. The commercial banks and other lenders need to slash the exorbitant rates that are currently strangling both consumers and businesses. These rates are unaffordable and are a drain on the economy when South Africa can least afford it. All commercial banks, as well as other financial lenders, need to provide interest-free loan holidays to all consumers in need.
This though needs to go beyond the commercial banks but should also include other registered financial lenders including payday loan lenders, clothing and furniture store accounts.
The reserve bank needs to be hands-on by imposing quantitative controls on commercial banks to ensure that a portion of their loans go to priority sectors that drive the growth path and create jobs on a larger scale.
Banks decide the amount of money that is lent out, to whom and for what purpose, therefore holding the power to reshape the economic landscape that affects us all. The reserve bank, therefore, has a responsibility to regulate this creation of the new money supply. We expect the reserve bank to ensure banks lend for productive purposes that create jobs or boost GDP, instead of consumption or for assets, causing asset price inflation.
Issued by COSATU
Sizwe Pamla (Cosatu National Spokesperson)
Tel: 011 339 4911
Fax: 011 339 5080
Cell: 060 975 6794