The South African Federation of Trade Unions (SAFTU) strongly condemns the South African Reserve Bank’s Monetary Policy Committee (MPC) decision to increase interest rates by 25 basis points.
This decision is economically reckless, socially destructive, and completely detached from the lived reality of millions of workers and poor people who are already drowning under the weight of unemployment, debt, hunger, poverty and rising costs of living. A 4% inflation rate is not a national emergency that justifies strangling the economy even further.
SAFTU has consistently warned in previous statements that maintaining ultra-low inflation targets in a collapsing economy comes at a devastating social and economic cost. Inflation targeting at these levels effectively means deliberately slowing down the economy by suppressing demand, restricting borrowing, discouraging investment and punishing indebted households. That is exactly what this latest decision will do.
South Africa is not suffering from an overheating economy. There is no wage explosion. There is no excessive consumer demand. There is no industrial boom creating inflationary pressure. The opposite is true.
We are facing stagnant growth, collapsing manufacturing capacity, factory closures, deindustrialisation, mass unemployment, declining household purchasing power, collapsing infrastructure and one of the deepest social crises since the end of apartheid.
The Reserve Bank’s response to this catastrophe is to make money more expensive.
This is totally irresponsible. Every increase in interest rates deliberately reduces economic activity. It is intended to suppress borrowing, reduce consumption, slow investment and weaken spending in the economy. In other words, it is a conscious decision to slow down an already weak economy.
The burden of this policy falls overwhelmingly on the working class and middle strata who are already heavily indebted and struggling to survive. Millions of workers are drowning in home loan repayments, Vehicle finance debt, Personal loans, Credit card debt, School fee debt, Municipal debt, Retail debt and Micro-loan debt. Every rate hike pushes families closer to default, repossession, blacklisting and financial ruin. At the same time, productive sectors of the economy are suffocated.
Industrialists, manufacturers, small businesses, farmers and productive enterprises require affordable credit to Expand factories, Modernise machinery, increase production, employ more workers, invest in new industries and build productive capacity. Instead, the Reserve Bank is making borrowing more expensive precisely when the country desperately needs investment-led industrial expansion.
This anti-growth monetary policy directly contributes to:
- Deindustrialisation
- Factory closures
- Retrenchments
- Reduced business expansion
- Falling domestic demand
- Lower employment creation
- Rising loan defaults
- Declining consumer spending
- Economic stagnation
The result is a vicious cycle where low growth produces unemployment and poverty, which then suppress demand further, causing even lower growth.
SAFTU has repeatedly argued that the current inflation-targeting regime primarily protects the interests of finance capital, commercial banks, speculators and ratings agencies while sacrificing workers, productive industries and the broader economy.
South Africa cannot solve unemployment and poverty by suppressing economic activity.
A country with an expanded unemployment rate of around 43% and approximately 13 million unemployed people cannot be prioritising low inflation over jobs, industrialisation and growth.
The real crisis facing South Africa is not 4% inflation.
The real crisis is:
- Approximately 13 million unemployed people on the expanded definition
- Worsening poverty and hunger
- Extreme inequality
- Deindustrialisation
- Collapsing infrastructure
- Energy and logistics failures
- A shrinking manufacturing base
- Growing precarity and informalisation of work
- Rising indebtedness of households
South Africa remains the most unequal society in the world.
According to Statistics South Africa’s latest Poverty Trends report, approximately 66.7% of South Africans live below the upper-bound poverty line, meaning nearly two-thirds of the population cannot afford adequate food and basic non-food necessities. Around 37.9% of the population, approximately 23 million people live below the lower-bound poverty line.
Millions therefore survive in conditions of permanent insecurity, deprivation and social desperation despite living in one of the richest countries in the world in terms of mineral wealth and natural resources.
Research by the University of Cape Town’s Southern Africa Labour and Development Research Unit (SALDRU) and other institutions continues to show that the overwhelming majority of Black working-class households remain trapped in structural poverty more than 30 years after apartheid.
At the same time, hunger has become normalised.
Statistics South Africa’s General Household Survey and food security studies continue to reveal that millions of households experience hunger regularly, while many children go to school hungry and many families sleep without having eaten adequate meals.
Around 13.8 million people are estimated to live below the food poverty line, meaning they struggle to secure even the minimum daily caloric intake required for survival.
The Pietermaritzburg Economic Justice and Dignity Group has repeatedly demonstrated that social grants are far below the cost of a nutritious food basket, the National Minimum Wage is insufficient to sustain a family, and even median wages increasingly fail to cover food, transport, electricity, education and housing costs. Millions are therefore surviving through debt, skipping meals, reducing nutrition and sacrificing basic human needs simply to stay alive.
In this context, increasing interest rates is not merely an economic error it is a direct assault on workers, the unemployed, the poor and the struggling middle strata. The Reserve Bank is effectively choosing to protect financial markets and inflation targets while millions battle unemployment, hunger, debt and despair.
SAFTU reiterates its call for a complete review of the Reserve Bank mandate and the abandonment of the failed neoliberal obsession with inflation targeting at the expense of jobs and development.
South Africa urgently requires:
- Lower interest rates
- Expansionary industrial policy
- Massive public investment
- Infrastructure-led growth
- Developmental state intervention
- Protection of strategic industries
- Job creation programmes
- Redistribution and higher wages
- Affordable credit for productive sectors
The economy cannot grow if households are crushed by debt and productive sectors are denied affordable capital. Workers and the poor cannot continue paying for an economic model that has failed catastrophically for more than three decades.
SAFTU further calls on COSATU and all progressive formations inside and outside the Alliance to intensify the struggle against the current neoliberal macroeconomic framework that has condemned millions to unemployment, poverty and inequality. Workers cannot continue being asked to vote for economic policies that destroy their jobs, livelihoods and future. The time has come for a complete break from austerity, neoliberalism and anti-worker economic policies.
A statement was issued on behalf of SAFTU by the General Secretary, Zwelinzima Vavi.
For media inquiries, contact the National Spokesperson
Newton Masuku
newtonm@saftu.org.za
0661682157
Media Officer
Asive Dyani
0719019564
