The hike in the repo rate is bound at least to slow down economic growth and the rate of new job creation, said the Congress of South African Trade Unions (Cosatu) on Thursday.
”The increase will hit thousands of small businesses, and discourage people wanting to raise the capital to expand or set up new businesses. And it is bound to at least slow down economic growth and the rate of new job creation,” the federation said in a statement.
Cosatu said the increase raises the real possibility of retrenchments at a time when unemployment is still ”far too high”.
It said it was appalled that the South African Reserve Bank’s monetary policy committee had announced it would raise the repo rate by yet another 50 basis points, bringing the rate at which it lends to banks to 11,5%.
”Within minutes some banks announced that their prime overdraft rates will rise by 0,5% to 15% from the current 14,5%.”
Cosatu said the hike hits borrowers at a time when they are already reeling from the rocketing prices of food, fuel and electricity, all of which are likely to rise even higher in the near future.
The federation said the policy of inflation-targeting is inappropriate for a developing country with high levels of unemployment and poverty.
”It will make it utterly impossible for us to meet even the modest Asgisa [Accelerated Shared Growth Initiative for South Africa] target of halving the 2004 levels of unemployment and poverty by 2014, and it condemns millions to remain jobless and poor.”
Cosatu called on the government and the South African Reserve Bank to recognise that the country’s biggest economic challenge is to increase growth and cut unemployment and poverty. — Sapa