Johannebsurg - Trade union federations were disappointed on Wednesday at the SA Reserve Bank's (SARB) decision to hike the repo rate to 5.5 percent, from the previous rate of five percent.
Congress of SA Trade Unions spokesman Patrick Craven said the trade union federation was angered by the bank's decision.
“Yet again the Reserve Bank, like the Treasury, is pursuing policies completely at odds with the government's overall strategy to accelerate growth and create jobs,” he said in a statement.
“It is a knee-jerk reaction to the fall in the exchange rate of the rand against other currencies and the imagined threat of rising inflation.”
The repo rate is the rate the SARB lends money to commercial banks.
Craven said the SARB's monetary policy committee (MPC) had used the usual argument that the bank's primary responsibility was to keep inflation under control.
“But while inflation is always a potential danger, it is far less of a problem 1/8than 3/8 South Africa's appalling levels of unemployment and poverty.”
The high level of unemployment and poverty was a ticking time-bomb, with ructions already being seen in community protests.
“Raising interest rates will make these central economic challenges even harder to overcome,” said Craven.
This was because more employers would be pushed into bankruptcy as borrowing costs increased. New businesses would find it harder to borrow start-up capital. The result would be fewer new jobs and the loss of existing ones.
Consumers would be hit, with house repossessions likely to rise as occupants found they could not afford higher interest rates.
“Cosatu has argued that a weaker rand can yield positive benefits,” said Craven.
It would create growth and job opportunities, as South African exports became cheaper and imports more expensive, encouraging people to buy South African products.
“We need a change of policy; the ANC and government must read the riot act to the Treasury and SARB and demand that they take a longer term view of its monetary policies and bring interest rates down, not up.”
The Federation of Unions of SA said the repo rate increase would hurt consumers and leave them with less cash to invest in the economy.
Deputy general secretary Krister Janse van Rensburg said: “We are both surprised and disappointed about this decision.”
Although Fedusa acknowledged the inflationary and exchange rate problems facing the South African economy, it needed to be understood that consumers were battling.
“Most working people have several loans, at least for essential items like a house or a motor vehicle,” Janse van Rensburg said.
“This further increase in cost of living, on top of recent mammoth increases in fuel, energy and food prices, will certainly hit them hard.”
While Fedusa agreed that inflation was enemy number one, and the savings of retirees and private individuals needed to be protected, their interest was with working people.
“On a macro-economic level we have consistently campaigned for the MPC to have due consideration for matters like economic growth and unemployment,” Janse van Rensburg said.
“We fear that this decision will negatively impact on these issues as well.”