COSATU statement on interest rates hikes

The Congress of South African Trade Unions (COSATU) is appalled by yet another repo rate hike by an indifferent and unaccountable South African Reserve Bank (SARB). The Federation agrees that inflation needs to be managed and brought under control as it depletes workers’ meagre wages, but it all depends on what causes the inflation. 

The economy will be lucky at this rate to achieve its projected 0.9% growth.  Unemployment is dangerously high at 42.4% and many companies have closed or are hanging on for dear life. This decision will make a bad situation worse.

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

The effect of the government outsourcing the management of the economy to the SARB and its one tool kit is a cumulative 475 basis points over the past 18 months.  This will suffocate the economy and collapse any prospects of it growing, especially because about 60% of the country’s GDP comes from consumer spending.

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 that 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 will be more cautious to borrow money from the banks to expand their operations and create more jobs.

The National Treasury needs to take full responsibility for this crisis and take drastic steps to provide the necessary relief to the economy.  The economy cannot afford for the SARB to continue increasing an already 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.

Whilst there is little that South Africa can do about the war, there are measures the government can enact to protect the economy and provide relief to workers. Key interventions that Government needs to undertake urgently include:

  • Lowering the fuel taxes that consume 28% of the fuel price.
  • Eskom and NERSA reviewing the 18.65% electricity tariff hike for 2023.
  • Treasury adjusting the SRD Grant for the inflationary erosion that has weakened its ability to help the poor.  It is beyond shameful that it has not been adjusted for inflation since it commenced in 2020.
  • Treasury and Parliament expediting the long-awaited Tax Amendment Bills to allow highly indebted workers early access to their pension funds.
  • Treasury and the public and private banking sectors developing a package of measures to help struggling consumers and SMMEs cope, and spur economic growth and job creation.
  • Engagements at Nedlac on reducing the price of 10 essential food items through VAT exemptions by the Treasury and the waiving of markups by retailers being fast-tracked.
  • Government coordinating a more aggressive buy local campaign that will support local industries and ensure the economy is dependent on imports across the value chains.  Consumers, the private sector, and the state all need to actively buy locally produced goods if we are to grow the economy and protect our exposure to international volatility.

It is clear to all properly adjusted persons that the status quo cannot be allowed to continue. The one-trick approach by the SARB is not just farcical but it is reckless and dangerous.

Issued by COSATU

Sizwe Pamla (Cosatu National Spokesperson)

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