Thursday’s ”minimal” 100 basis points repo rate cut will do little to help with economic recovery in the country, the Congress of South African Trade Unions (Cosatu) said.
”The Monetary Policy Committee has let slip an opportunity to kick-start a national campaign to reverse the slide into recession, save jobs and open up the road to recovery,” said Cosatu spokesperson Patrick Craven in a statement.
He said the trade union federation was ”angry” as the cut would do little to help South Africa escape from ”severe economic recession”.
The Monetary Policy Committee (MPC) of the South African Reserve Bank cut the repo rate by 100 basis points on Thursday.
The repo rate now stands at 7,5%, while commercial banks are set to reduce their prime rate to 11%. This is the bank’s fourth rate cut this year.
”While of course any reduction is better than none, this cut is less than half the minimum reduction which Cosatu has been calling for,” said Craven.
”A 200%+ cut could have signalled the beginning of a turnaround.”
He said this kind of cut would have assisted companies currently in debt to survive. It would have also helped them save worker’s jobs. New businesses would also have an incentive to start up and employ people.
”For individuals with bonds and loan repayments it would release more money to spend on goods and services, stem the decline in demand and provide work for the workers producing those goods.”
However, the reserve bank had ”failed” in providing leadership, said Craven.
”It still sees the recession and rising retrenchments as less serious threats to the economy than inflation, which is now clearly on a downward path.”
He said the National Union of Metal Workers of South Africa was planning on demonstrating in support of Cosatu’s call for a larger repo rate cut and a monetary policy not focused exclusively on inflation targeting.
The federation’s central executive committee would meet on June 1 and 2; ”and will undoubtedly be looking very sympathetically at the Numsa campaign”, said Craven. — Sapa