SAFTU statement on the decision of the SA Reserve Bank to cut interests rate by 0.25%

The South African Federation of Trade Unions – SAFTU rejects the decisions of the SA Reserve Bank Monetary Policy as being too little too late.

SAFTU has repeatedly called on the SA Reserve Bank and all government institutions to act with absolute urgency in response to the unfolding and deepening economic catastrophe. Reserve Bank and the World Bank keep on telling the country that the South African economy has stagnated and will see less than 1% growth in 2020 yet act with no urgency to address.
The Monetary Policy decision to cut the rates by a mere 25 basis points is a slap in the face of industrialists be they big, medium-size or small.

SAFTU has been campaigning to ensure that the current monetary policy be radically loosened, as it now creates a situation where cash returns from money market investments, which currently generate a return of inflation plus 3%-4%. This is not normal, as long-term (10yr) average cash returns are approximately inflation plus 1%. That means there is no incentive for institutional investors to take risks when risk-free assets generate these sorts of returns in a low growth environment. Institutions can simply put away their funds in money market portfolios and generate a decent return of 3%-4% above inflation by investing cash in the safest asset class in the market. This is a major disincentive to risking capital in the real economy. This is one of the major structural weaknesses facing our economy. This is what has led to deindustrialisation, economic stagnation and job loss blood bath!

SAFTU demands a monetary policy decision that cuts interest rates and lowers the cost of borrowing, resulting in higher investment activity and the purchase of consumer durables. The expectation that economic activity will strengthen may also prompt banks to ease lending policy, which in turn enables business and households to boost spending. In a low interest-rate regime, stocks become more attractive to buy, raising households’ financial assets. This may also contribute to higher consumer spending and makes companies’ investment projects more attractive. Low-interest rates also tend to cause the currency to depreciate because the demand for domestic goods rises when imported goods become more expensive. The combination of these factors raises output and employment as well as investment and consumer spending.

Our major problem is that the SA Reserve Bank enjoys the full support of the ANC led South African government who see nothing wrong with pursuing an anti-growth momentary policy. The ANC leadership has so far refused even to implement their own national conference resolutions calling for the nationalisation of the Reserve Bank and changing its mandate to include job creation and other development imperatives more explicitly.

SAFTU is working hard to consolidate all the economic demands of the working class and take them to the streets to demand fundamental changes to the structural economic crisis we face. Power concedes nothing without a struggle, and what we have no won on the roads will not be won in the negotiations table.
Workers and the poor must stand up or perish!

Please follow and like us:

Be the first to comment

Leave a Reply

Your email address will not be published.