COSATU statement on interest rates

The Congress of South African Trade Unions has noted the decision by the South African Reserve Bank`s Monetary Policy Committee (MPC) to cut the repo rate by 25 basis points to 6.5%. We welcome the long-overdue reduction of the interest rate by the Reserve Bank, especially because the decision is in synch with the government’s commitment to making 2019 the year job creation.

This will provide badly needed relief to consumers struggling to pay their loans. It will make it easier for small businesses and industry to grow and hopefully spur economic growth. The economy is still in a very fragile condition with thousands of workers being retrenched every month. The federation urges the Reserve Bank to further ease interest rates in its next three quarterly meetings.

COSATU urges the banks to equally come to the party and make their products affordable to the poor and businesses. South African banks are a key impediment to economic growth and employment creation. 

Whilst, we welcome this decision it still falls far short of our calls for a radical decrease in interest rates in order to stimulate the economy and create new decent jobs. The Federation finds it astonishing that South Africa continues to have rather high interests rates when many conservative governments around the world are slashing interest rates to save jobs. This hard-line stance on interest rates will make South African exports uncompetitive.

It is unfortunate that the Reserve Bank MPC has missed numerous opportunities to stimulate our economy and contribute to the decrease in unemployment in this country.

Going forward we need a Reserve Bank that is not indifferent to the plight of the poor who are currently reeling under the pressure of skyrocketing prices of food, fuel and electricity.

High interest rates raise the cost of living for everyone who is repaying a loan but also indirectly as they force companies to recover high loan repayments from their consumers by raising the price of their goods and services.

The expansion of the manufacturing sector will remain an illusion as companies will be more cautious to borrow money from the banks in order to expand their operations and create more jobs.

The high-interest rates also continue to deter thousands of small business from raising capital to expand current businesses or set up new ones. This is a serious factor that contributes to the slowdown in economic growth and the slow rate of new job creation

COSATU repeats its call for the review of the Reserve Bank’s mandate so that instead of narrowly fighting inflation, it has a mandate to contribute to realizing our employment, economic growth and redistribution targets.

Lastly, we call on President Cyril Ramaphosa to sign the National Credit Amendment Bill, since it will provide further badly needed help for consumers drowning in debt. The Federation is aware that both the Banking Association and National Treasury are lobbying the President not to sign it. The President must not listen to such cold-hearted profit at all costs monopolies. He should stand firm on the side of the people, who elected him and sign the bill. 

Issued by COSATU

Sizwe Pamla (Cosatu National Spokesperson)

Tel: 011 339 4911
Fax: 011 339 5080
Cell: 060 975 6794