EFF statement on SARB’s decision to increase the interest rate
22 September 2022
The EFF is disgusted by the senseless, cruel and irrational decision of the South African Reserve Bank Monetary Policy Committee to increase the repo rate by 75 basis points to 6.25%. The Reserve Bank has been increasing interest rates by a 50-basis point increase to 4.57% in May and a 75-basis point increase to 5.50% in July.
The South African Reserve Bank's obsession with outdated and redundant monetary policy in the face of overwhelming evidence of absolute failure. The current monetary policy will only lead to more misery for many of the working-class households that are highly indebted, will lose their homes and cars, and are struggling to afford food and other essentials.
The finance minister succumbed to international finance and markets and announced in February that he would reduce the percentage of the amount pension funds and insurance companies are required to keep in the country from 70 per cent to 50 per cent, resulting in massive capital outflows. This is the money that was supposed to be invested correctly in productive sectors of the economy instead of being given to
financial gamblers only obsessed with short-term investment in credit and financial instruments. This happens all while South Africa's productive sectors are struggling to attract capital investment to rebuild some of the critical employment creating sectors back to full operations.
The EFF is not convinced that the obsession with hiking interest rates is driven by inflation targeting money policy. The inflation targeting policy has proved to miss the intended outcome and has only made planning difficult. So, the policy of "inflation targeting" in a South African economy that is heavily based on finance, where every consumer good can be imported, and where the government hasn't used the procurement budget in a strategic way has only made the economy less efficient. What we have in South Africa is not monetary policy but financial sector profit-indicator policy.
Instead, the obsession with hiking interest rates recently is a poor attempt by the South African Reserve Bank to reverse the mismanagement of capital in and outflows. The increase in interest rates is meant to attract investors' interest in get-rich-quick schemes, where investors put money in credit with the knowledge that they can withdraw their capital with ease at any time.
We are not shocked that despite the worsening cost of living, when many households cannot afford to buy food, cannot afford transport, electricity, or housing, there is no practical and believable plan to intervene by the government through monetary and fiscal policies. The National Treasury and the South African Reserve Bank have made it clear that they will only serve the interests of the financial and mining sectors at the expense of the workers whose real income is decreasing with each year. Many of the working-class households that are highly indebted are already losing their belongings, most painfully, their homes.
The EFF will continue to call on all stakeholders, particularly trade unions, to reject the neoliberal redundant obsession of the National Treasury and the South African Reserve Bank and organise in all spaces to concertise and mobilise society.
Issued by Sinawo Thambo, National Spokesperson, EFF, 22 September 2022
