SAFTU strongly opposes the South African Reserve Bank’s (SARB) recent repo rate cut of 25 basis points. This marginal reduction—a mere quarter of a percent—will do little to ease the financial burden on already over-indebted households.
The SARB has effectively achieved its inflation target by facilitating a vast transfer of wealth from the working and middle classes to the banking sector. Inflation now sits at 3.0%, the lower bound of the SARB’s target range. Yet, despite this, the SARB persists with its high-interest rate policy, stifling the productive economy while prioritising financiers.
South Africa’s hyper-financialized economy has long dictated a monetary policy that serves the interests of financial capital at the expense of productive sectors, especially manufacturing. For decades, the SARB has uncritically catered to financiers’ demands, with devastating consequences for industrial development and job creation.
Monetary Policy is Choking the Productive Economy
While several factors have contributed to the decline of manufacturing—such as the influx of cheap Chinese imports—restrictive monetary policy has been a major culprit. The financial industry generates far fewer jobs per output unit than the productive sector, and an economic policy designed to benefit financiers instead of industry exacerbates unemployment.
The SARB’s high-interest rate regime has produced clear winners and losers. The winners are the banks, which have recorded massive profits since interest rates started rising post-pandemic. At the same time, the losers are the working and middle classes, whose disposable incomes have been decimated. As interest rates climbed, debt servicing costs swallowed a greater share of workers’ earnings. The default index confirms this trend, reflecting an alarming increase in loan defaults—clear evidence that the SARB’s policies are crushing households while enriching the financial sector.
The Working Class as the Sacrificial Lamb
Ordinary South Africans are struggling to meet their debt obligations. Debt Busters’ Q4 2024 Debt Index found that those applying for debt counselling allocate a shocking 66% of their take-home pay to debt repayments—the highest ratio since 2017. Among those earning R35,000 per month, this figure jumps to 72%.
Beyond the exorbitant interest rates imposed on behalf of the bankers, food prices continue to soar despite official inflation figures. According to the Pietermaritzburg Economic Justice and Dignity Group (PMBEJD), the cost of a basic household food basket surged from R3,199.86 in 2019 to R5,383.38 in December 2024—a staggering 68% increase.
Meanwhile, Eskom has proposed a 36.15% tariff hike for 2025. If approved by NERSA, this would push the average monthly household electricity bill from R2,948.98 to R4,015.04. Electricity alone consumes roughly 30% of a minimum-wage worker’s income.
Adding insult to injury, the National Minimum Wage Commission has proposed a meagre 1.5% plus CPI increase for 2025, raising the minimum hourly wage from R27.58 to R28.79—translating to a monthly salary of just R5,182.20 for a full-time worker.
To put this into perspective, just two essential expenses—food and electricity—now exceed the monthly earnings of 6.5 million workers, half the country’s employed population, who earn a mere R5,400 per month.
The SARB’s Interests Lie with Speculators, Not Workers
This recent rate cut is likely to be the last for 2025, dictated by the imperatives of the international monetary system. The SARB remains bound by a financial architecture in which the U.S. dollar serves as the global reserve currency. This is compounded by the near-total absence of exchange and capital controls in South Africa. This forces the SARB to maintain high interest rates to attract forex speculators betting on the rand.
The situation is further exacerbated by U.S. President Donald Trump’s renewed trade war policies, which could strengthen the dollar and fuel global inflation.
Why the SARB Keeps Interest Rates High
The SARB’s monetary policy adheres to the neoliberal consensus, which prioritises the unrestrained movement of capital in the interests of the capitalist elite. Since 1995, the SARB has systematically dismantled capital and exchange controls to attract investment. The underlying logic is that capital—whether in financial or commodity form—must be free to move globally, flowing into markets deemed “efficient” and abandoning those considered uncompetitive.
To ensure capital inflows, countries must race to the top on interest rates, offering financial speculators ever-higher returns. According to this flawed logic, market forces will reward “efficient” economies with investment, growth, and prosperity.
The Neoliberal Triad: Austerity, Free Trade, and Monetary Policy
The SARB’s high-interest rate regime is just one pillar of the neoliberal triad through which capital relentlessly wages war on the working class. This triad consists of:
- Fiscal Austerity – Budget cuts in essential services such as healthcare, education, and policing, all in the name of deficit reduction.
- Restrictive Monetary Policy – Keeping interest rates artificially high to serve the financial elite.
- Unrestricted Trade Liberalization – Opening borders to cheap imports, destroying domestic industries and jobs.
Like monetary policy, industrial policy has been dictated by neoliberal orthodoxy. This doctrine demands unrestricted trade under the guise of “free markets.” It claims that the best goods will prevail at the lowest prices, but it has devastated South Africa’s manufacturing base.
Fiscal austerity is the final blow. The National Treasury, under Finance Minister Enoch Godongwana, remains committed to implementing the harshest budget cuts yet when he delivers his budget speech on February 19th, 2025. These cuts will further erode critical public services that millions rely on.
Neoliberalism Has Failed the Working Class
The consequences of this neoliberal regime have been catastrophic. Austerity has gutted public services, monetary policy has transferred wealth to the bankers, and trade liberalisation has deindustrialised the economy.
We strongly condemn the SARB’s weaponisation of monetary policy against the working class in the name of fighting inflation. We reaffirm our demand that monetary policy must serve the urgent task of re-industrialization—the most effective way to combat inflation—rather than enrich financial elites at workers’ expense.
The fight for economic justice demands that we break from the neoliberal stranglehold and reclaim monetary policy as a tool for development, employment, and shared prosperity.
