Source: SARB


In its 5th meeting of 2023, the South African Reserve Bank (SARB)’s Monetary Policy Committee left the repurchase (repo) rate unchanged, at 8,25% and the prime lending rate at 11,75%. Though relieved, the South African Federation of Trade Unions (SAFTU) wished that the SARB could have decreased the interest rates.

Decrease in interest rates will provide much relief to working-class households who are currently drowning in debt. It is our contention that declines in private household employment is caused by, amongst others, the increased debts servicing costs for households, forcing them to cut on household monthly expenditure in other areas.

However, we are not surprised by this decision to keep the interest rates unchanged. The SARB is devoted to neoliberal monetarism, and like their father Milton Friedman, they think that “inflation is always and everywhere a monetary phenomenon.” By not decreasing the repo rates, they believe they must curb the money supply by punitively keeping costs of borrowing high so that the working-class people will not have enough money to buy, as a way of curing the “monetary phenomenon.” Hence the SARB Governor, Lesetja Kganyago, said they are committed to a restrictive monetary policy. Restrictive monetary policy means instituting interest rates to the level that they reduce money in circulation, choke aggregate demand and stimulate recession.

SAFTU is opposed to using interest rates as tools to fight inflation. As we have explained previously, “interest rate hikes are inhumane, with dire consequences for the living standards of ordinary workers, creating unemployment, pushing small business traders out of business, and dampening the productive sectors of the economy as a whole.”

The policy rates and fiscal austerity are used in conjunction to meet the standards and objectives of neoliberal policy. Besides the deplorable argument advanced by the National Treasury on implementing the fiscal consolidation, the curbing of government expenditure is also aimed at helping the SARB meet its money-controlling efforts.

Our argument is that monetary policy, fiscal policy, and industrial policy must be coordinated in unison to lead increased production, increased GDP, price controls and job creation. The means of production that are not utilized are sitting at 21,9%, and unemployment is over 11 million, combined in value creating process we would alternatively fight inflation without interest rates.

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