FEDUSA Disappointed with SARB Decision to Hike Repo Rate
28 January 2021
The Federation of Unions of South Africa (FEDUSA) is disappointed that the South African Reserve Bank (SARB) has decided to raise the repo rate by 25 basis points from 3.75 % to 4%.
It is a disgrace that SARB has failed to reduce interest rates in an environment of high unemployment rate of 46.6% that could get worse as the economy struggles to recover from the COVID-19 pandemic.
The hike is a big slap in the face of millions of workers, consumer and businesses trying to survive the pandemic. This move has pushed sectors hardest hit by the COVID-19 pandemic such as tourism and hospitality further into the doldrums. A fifth wave of COVID-19 is also reportedly on its way will further traumatize a pandemic weary populace.
A retention or reduction of interest rates would have alleviated the brutal pressures on workers’ pockets and many households who are increasingly dependent on expensive loans and credit to make-up for lost incomes or falling real wages. It would also have given much needed relief to small businesses. However, on the flip side, the hike brings some relief for millions of pensioners reliant on the proceeds of their lifelong pension contributions.
The failure to reduce the interest rate exemplifies how the SARB, like Treasury, is unwavering in their commitment to failed neoliberal policies regardless of the detrimental impacts it has for the majority in the country. The only real obstacle in the way of reducing the interest rate would be the power of the financial sector. Reducing interest rates pose no real threat to the Rand.
Firstly, SA’s currency reserves are the highest they have been since the 1950s and secondly should a radical reduction of interest rates lead to currency outflows these can be easily mitigated by strengthening exchange and capital controls. In the present war-like situation, the monetary and fiscal institutions of our country are promoting a policy of death. The SARB and Treasury remain committed to policies that exacerbate suffering and hardship faced by the majority of South Africans. It must not pass unchallenged.
The reality of the matter is that transportation costs due to the fuel hikes will no doubt be passed onto the consumers already hard hit by the interest rates, as government has signalled the likelihood of five potential hikes this year.
For interviews please contact:
Ms Riefdah Ajam
FEDUSA General Secretary
079 696 2625
Mr Ashley Benjamin
FEDUSA Deputy General Secretary
083 258 4433