If South Africa’s slide into recession is to be reversed, interest rates must not just remain unchanged but come down, the Congress of South African Trade Unions (Cosatu) said on Thursday.
Reacting to the decision by the South African Reserve Bank’s monetary policy committee (MPC) decision to keep the interest rate unchanged at 12%, Cosatu spokesperson Patrick Craven said that against a ”gloomy background” it ”clearly had no alternative”.
”Monetary policy has to be based on targeting economic growth and job creation, instead of the totally discredited and wholly inappropriate policy of focusing narrowly on inflation targeting, which has failed and had disastrous negative consequences for job creation, living standards and prospects for future economic growth.”
Rising interest rates are themselves one of the biggest reasons for rising inflation, as they add to the burdens of families and small businesses, he said.
Cosatu will raise its concerns at the tripartite alliance’s forthcoming economic policy summit meeting where it will insist that the government and the Reserve Bank move to an economic policy that was pro-poor and pro-worker, he said.
He described the MPC’s latest rates decision as a ”small victory” for union members, who recently took to the streets in a protest against price hikes. ”It is also a victory for logic,” he said.
However, Cosatu is angry at the damage already done to economic growth and job creation as a result of the 10 interest-rate increases in the past two years.
In making the latest rates announcement, Reserve Bank Governor Tito Mboweni provided ”grim evidence” that the government’s rates policy has ”killed off any hope of growth in the near future”, Craven said.
Mboweni confirmed, among other things, that the slide towards recession is gaining momentum, with real growth in gross domestic product lower than the rates achieved in the past few years. ”The governor also confirmed that the MPC has failed in its stated objective of keeping inflation down.”
Craven said Mboweni produced clear evidence that workers’ wages are not keeping pace with inflation.
”There could be no clearer evidence that workers’ living standards are falling fast,” he said. ”Wage increases are way below the rise in prices. And as always the poor, who spend a high proportion of their incomes on food, are suffering the most.
”Union negotiators will be taking note of these statistics and rightly demand much higher wage settlements that at the very least recompense workers for the cut in their real standard of living.” — Sapa