Repo rate hike: More economic pain for South Africans while economic reform stalls

21 July 2022

The decision by the South Africa Reserve Bank (SARB) to increase the repo rate by 75 basis points, while widely expected, brings more economic pain for South Africans who are already struggling to keep their heads above water in a non-performing economy.

This is the highest increase in the repo rate that the SARB has made in over 20 years. It not only confirms the weak economic fundamentals in the local economy, but also highlights its inability to withstand negative headwinds from a struggling global economy.

With a high inflationary environment driven by rising costs in fuel, food, housing and transport, South Africa now runs a serious risk of an increasing food poverty rate among low income households.

South Africa could have been better prepared to absorb most of the economic shocks had the economy been better managed. Sadly, the economy is in the middle of a confidence killing energy crisis and the economic structural reform process appears to have stalled.

Faced with the highest unemployment rate in the world, it confounds reason that the government appears to be lost at sea on how best to respond to the economic crisis. Transnet’s inefficiencies is affecting South Africa’s ability to compete in the export market, ports have become an unmitigated disaster and our energy supply cannot support investment and growth.

Monetary policy can only go so far in combating inflationary pressures. Sustainable economic recovery can only be achieved through evidence driven macro-economic policies that are centred on growth and increasing investment in the economy.

Government should be responding through fiscal policy interventions that are urgently needed now. South African citizens are being taxed into poverty and under prevailing circumstances tax relief is urgently needed. It would have been possible to provide this if public finances were better managed and less of the people’s money was stolen, misappropriated and unwisely spent.

It is unfortunate that the ANC’s refusal to pursue growth enabling economic reforms has left government with virtually no room to cushion vulnerable households from the ravages of inflation. President Cyril Ramaphosa’s Cabinet, which must shoulder the blame for this lethargy, continues to be secure in the comfort of taxpayer funded government perks.

Issued by Dion George, DA Shadow Minister of Finance, 21 July 2022