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 keep the repo rate at 6,5%. 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.

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.

It is another proof that the Reserve Bank is indifferent to the plight of the poor who are currently reeling under the pressure of massive debts. High-interest rates raise the cost of living for everyone who is repaying a loan. 

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 Reserve Bank’s mandate to include our employment, economic growth and redistribution targets, instead of narrowly fighting inflation. As workers, we favour an approach that incorporates both the developmental imperatives and protect the currency because these are mutually reinforcing rather than contradictory.

It is our considered view then that narrowly targeting inflation ignores the long-term impact of colonialism and apartheid in favour of satisfying narrow interests of those already with resources including foreign investors. 

In addition to targeting employment, the reserve bank should align its policy to industrial development, introduce foreign exchange controls and impose quantitative controls on commercial banks to ensure that a quarter of their loans go to priority sectors that drive the growth path and create jobs on a larger scale.

This latest decision is proof that the SARB remains captive to the narrow interests of the rentier financial capitalists, some of whom are its shareholders – a reality that renders the notion of its independence preposterous. 

The federation is now calling for the immediate intervention by the ANC and the President to ensure that the mandate of the Reserve Bank is expanded, as per the ANC Conference resolution.  The President needs to have a frank discussion with the Governor and Reserve Bank’s Monetary Policy Committee on the need for the Reserve Bank to urgently lower interest rates to help stimulate the economy – and to provide badly needed relief to indebted consumers and SMMEs. 

Moody’s will downgrade us in February if we are not seen to be growing the economy. It does not take a rocket scientist to realize that lowering interest rates is essential to achieve this. 

Lastly, COSATU is calling upon the President to urgently fill the two vacancies on the Monetary Policy Committee with progressive economists, as the current composition is clearly stifling its ability to be creative and recognize the brutal realities of our economic crisis. 

Issued by COSATU

Sizwe Pamla (Cosatu National Spokesperson)

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