COSATU Statement on Interest Rates

The Congress of South African Trade Unions is disappointed that the South African Reserve Bank's Monetary Policy Committee (MPC) has announced today that it will keep the repo rate at 5.5 percent. This falls far short of our calls for a radical decrease of interest rates in order to stimulate the economy and create new decent jobs. 

The decision to keep interest rates unchanged is out of synch with government's commitment to make 2011 the year job creation and the New Growth Path and Industrial Action Plan targets.

COSATU 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. 

The Reserve Bank MPC has missed an ample opportunity to stimulate our economy and contribute to the decrease in unemployment in this country.

COSATU strongly believes that this decision is tantamount to the Reserve Bank being indifferent to the plight of the poor who are currently reeling under the pressure of sky rocketing 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

This decision also means that instead of creating more jobs, companies will continue to retrench workers and thus plunging thousands of people into poverty and destitution.

Under this situation, home repossessions and evictions for thousands of working class people who have taken up home loans from the banks will remain a startling possibility.

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.

Statement issued by Phindile Kunene, Shopsteward Editor, COSATU, September 22 2011

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