The South African Federation of Trade Unions strongly condemns the SARB’s continued weaponisation of monetary policy against the working class in favour of the bankers to fight inflation. We reiterate that economic policy must be at the service of the drive to re-industrialize the economy – which is the most effective way to fight inflation – instead of ramping up interest rates, giving profits to financers and impoverishing the working class. Since the SARB’s successive interest rate increases from November 2021, households have struggled to keep pace with their debt obligations. The SARB consecutively increased the repo rate, leading to an increase in the prime lending rate from 7% to 11.25% – a staggering 68 % increase in the cost of credit. Moreover, at the start of the SARB’s interest rate increases, households were spending 6.7% of their disposable incomes on servicing debt; the figure has now reached 9.2% – representing an increase of 37%. By 2022, 80 % of middle-income earners were spending their monthly earnings within five days of being paid, with 65% of the earnings servicing debt.
The primary beneficiaries of the SARB’s crusade against inflation have been the banks and their executives, at the expense of the working class and the middle class. Since the SARB’s rate hikes commenced, banks have seen their profits soar, with their executives earning exorbitant salaries owing to the redistribution of wealth from the households into bankers’ coffers. Just eight months after the SARB started its streak of rate increases in June of 2022, the banks began amassing profits – with Standard Banking realising a 34% increase in its earnings, First National Bank a 23% increase and ABSA Group generating a 27% increase, to its headline earning in its interim financial reports for the first half of 2022. Recent figures show that in the financial year 2023, the combined earnings of banking executives of the top five banks amounted to R456,24 million. This is in a country that is among the most unequal in the world.
Typical of a physician who cures the disease by killing the patient, the SARB inches closer to its inflation target at the economy’s expense. Unemployment and inequality are at catastrophic levels, while the economy grew by a measly 0.4 % in the fourth quarter of 2024.The unacceptably high unemployment rate in the South African economy is not unrelated to the SARB’s fight against inflation – it is at the heart of it. Put bluntly, the SARB targets inflation by deliberately creating unemployment, which ripples through the whole economy, producing dire consequences for the working class. That is, by making credit expensive, the SARB intends to reduce the amount of money in circulation, thereby bringing demand into balance with supply. Put differently, whenever there is inflation in the economy, the SARB insists that the working class must pay for it – high demand or not.
The cruel class warfare SARB wages against the working class becomes apparent when it is considered that at the start of the successive rate hikes, the SARB itself admitted that the inflation it was fighting did not result from an increase in demand. Instead, it attributed the inflation to exogenous factors – i.e., the disruption of global supply chains due to Russia’s war on Ukraine, the droughts that affected harvests and other factors unrelated to demand. Yet, despite its admission, the SARB proceeded to hike rates, reducing what little disposal income households had, as it sought to bring down demand on par with the supply. This was not a policy mistake; instead, the SARB answered the question: Which class in society must shoulder the burden of the battle against inflation? And, consistent with its mandate as the defender of finance capital, the SARB answered: the working class! The result has been a massive transfer of wealth from the working classes and middle classes to the financiers.
