ANDILE NTINGI, Johannesburg | Friday
SOUTH Africa’s main labour federation Cosatu said on Thursday it expected across-the-board above-CPI wage increases this year, fuelling concerns it will fire spiralling inflation.
The country’s central bank has highlighted wage rises as a key threat to its efforts to quash inflation pressures caused by the rand’s steep slide last year, and has so far raised interest rates twice by 100 basis points this year.
But COSATU, which has about two million members, says it needs higher wages to cope with higher prices.
”Inflation has accelerated, mostly because of the increase in food prices — with a devastating impact on workers and the poor in general,” Zwelinzima Vavi, general-secretary of Congress of South African Trade Unions (Cosatu), told reporters.
”The rise in food prices means that the cost of living for workers is rising faster than the consumer price index (CPI), and we expect wage increases to reflect this.”
The rand’s 37 percent fall against the dollar last year has fuelled inflation, putting the Reserve Bank’s CPIX inflation target which excludes the effects of mortgage rates of between three and six percent by 2002 out of reach and forcing the central bank to raise interest rates.
CPIX rose by 8.0 percent in the year to March, compared with 7.5 percent in February, while the all-commodities producer price index (PPI) rose 14.4 percent in March, compared with 13.2 percent in February, which is expected to put more pressure on consumer prices in the months ahead.
TIGHT MONETARY POLICY
Vavi criticised the government’s stance on inflation, saying it worsened the country’s already high unemployment and compromised economic growth.
”The current approach of raising interest rates…will aggravate unemployment and falling investment…We call on the Reserve Bank to refrain from interest rate increases,” he said.
A senior central bank economist acknowledged on Wednesday that an increase in average wages in excess of productivity could force the central bank to further tighten monetary policy.
”If we are going to see suddenly a very sharp increase in wages, then further inflationary pressures will be there,” said Louis Venter.
Already there has been talk that a multi-year wage deal in the public sector could be reopened because of rising inflation.
The government and 12 public sector unions signed an agreement last year that allows both parties to re-open wage talks should the threshold on CPIX be lower than four percent or higher than 7,5%. – Reuters