The South African Federation of Trade Unions (SAFTU) notes the stubborn inflation which remains high above 7%, and averaged 7,2% in December 2022. Our members and the working class at large had the most difficult December as prices of food sat at 12,4%.
Even though statistics showed inflation easing from 7,4% to 7,2%, food inflation increased by 0,4%. Concretely, this was proved by the Household Affordability Index, which has shown that a cost of household grocery increased by R17 from R4 835,96 in November to R4 853,18 in December 2022. The yearly increase was R577,24, taking the average cost of household grocery from R4 275 in December 2021. In the past 5 years, the costs of household grocery increased by R1 830.
Combined with increases in fuel – which has increased more than 70% at the peak last year, and now is still 40% what it was in March 2020 – electricity, transport and other household essentials and interest rate hikes, the burden of the rising cost of living on the unemployed, and ordinary and middle-income earning working people has increased manifolds.
Unfortunately, the December inflation statistics will give a further pretext for the South African Reserve Bank (SARB) to hike interest rates. Business Times on Sunday (15 Jan) published opinions of some academics and economists who were giving que to the SARB by anticipating interest rate hike.
The SARB and its army of commentators, all neoliberal monetarists, are using a painful way of hiking interest rate hikes to fight inflation. Because of their belief that “inflation is everywhere and always a monetary phenomenon”, to fight inflation, they always strive to reduce the money in the pockets of consumers who are overwhelmingly working class people. This is done by making financial liabilities such as loans, bonds and credit facilities expensive through interest rate hikes.
This method drains money out of people’s pockets, and simultaneously pushes small businesses into bankruptcy, which in turn stimulates unemployment. Like the Chair of the Federal Reserve, Jerome Powell, remarked last year, this is indeed a painful way to fight inflation. Nonetheless, because of their beliefs, they enthusiastically utilise it.
But SAFTU has said in the past that the problems exacerbating inflation arise out of a limping economy in which bosses do not want to invest in the productive sectors of the economy. In fact, some of these economists blame lack of “economic growth”, but ironically still favour interest rates as a method to fight inflation.
Previously, we have argued that the SARB and Treasury must coordinate to power the idle industrial capacity, which sat at over 20% in 2022. Further, production in all productive sectors and industry must be expanded on a scale that meets the growth of aggregate demand. This will be the most humane and prosperity creating measure to fight inflation, rather than an unemployment and poverty accelerating method of interest rates.
The looming interest rate hikes will worsen the living conditions of workers in terms of debt servicing and living costs. The South African Poultry Association (SAPA) has shown that South Africans are failing to even buy eggs. This is because the rising cost of living squeezes the income of workers, and workers are left with the option of prioritising consumables and debt service.