COSATU welcomes the South African Reserve Bank Monetary Policy Committee’s decision to further reduce the repo rate
21 May 2020
COSATU welcomes the South African Reserve Bank’s positive response to our call for a further repo rate cut. The Reserve Bank MPC has voted to reduce the repo rate for the fourth time this year, from 4,25% to 3,75%
This is a welcome intervention at a time when the economy needs all role-players to come to the party and offer whatever relief they can to consumers, businesses; and millions of workers struggling to survive Covid-19 and the resultant lockdown. While this decision is not a magic wand, it will help to put some cash in workers’ pockets.
Monetary policy the domain of the Reserve Bank has a profound impact on the South African economic environment and the ability of the country to meet its development goals. Monetary policy influences the conditions under which the private financial sector can create credit, it determines the growth rate of the money supply and the level of the interest rate.
The Federation and most economists believe that with the low and declining inflation level, there is enough room for further repo rate cuts by the SARB this year. We urge the SARB to further lower the repo rate as we reopen the economy in June.
As workers, we want the bank to adopt a methodology that incorporates both the developmental imperatives and also protects the currency. These do not clash and can be managed with rationality and prudence. The current policy of low inflation has entrenched apartheid economic policy of separate development, income, and asset inequalities. The inequalities that have been exposed can also be traced to the role of the Reserve Bank over the past quarter of a century.
Workers and their families need every bit of relief the SARB can extend. The SARB, banks and national treasury need to make use of every tool in their toolkit to save our economy. There simply is no space for the timidity of the past.
The commercial banks need do the right thing by reducing their lending rates, especially for productive purposes. They need to slash their exorbitant interest rates they have used to fleece workers and consumers of their meagre incomes.
Making credit accessible and affordable for workers, consumers and businesses is critical to avoiding a deep depression, rebuilding the economy, and creating jobs. It is also what is needed to drive illegal lenders out of existence.
The commercial banks, which each pay their CEOs more than R150 000 every single day, cannot moan about poverty.
Lastly government must engage with the SARB about the role it needs to continue playing in leading our economic recovery. The days of a SARB that believes it has no role in lowering 40% levels of unemployment must come to an end.
The Reserve Bank has done considerable damage to this country’s economy under the guise of independence. The decision to scrap the Currency and Exchanges Act of 1933 in exchange for flexible exchange controls was a big mistake. This has facilitated the flight of capital out of South Africa, with many big corporations leaving the country for US and Europe. With them they took massive resources from a country that they had exploited for over a century under inhumane conditions.
This liberalisation of capital and exchange controls has facilitated massive outflows of capital over the past few years, depriving the country of badly needed resources for productive domestic investment.
We reiterate our call for the imposition of tighter capital controls to maximise the resources available for productive domestic investment. Such capital controls would include the regulation of short-term capital flows, and the penalising of speculative capital. Even the most developed economies do introduce necessary temporary measures to prevent a mass exodus of capital outflows during a time of crisis or to protect their currencies.
Issued by Sizwe Pamla, National Spokesperson, COSATU, 21 May 2020
