CAPE TOWN- United Association of South Africa (UASA) on Friday said it was disappointed that the Monetary Policy Committee of the SA Reserve Bank on Thursday decided to leave the repo rate unchanged.
UASA is one of several unions affiliated to the Federation of Trade Unions of South Africa (FEDUSA) which represents approximately 500 000 members at the macro level.
“The Monetary Policy Committee of the SA Reserve Bank missed a golden opportunity by not cutting the repo rate by at least another 25 basis points,” said Andre Venter, UASA spokesperson.
The Union said that It was its contention that with the Consumer Price Index (CPI) currently at its lowest level since September 2015 (last month StatsSA announced an annual CPI of 4.6% in July 2017, down from 5.1% in June 2017), no demand inflation, a stable currency, low credit growth for individuals, unemployment and poverty at record levels, and an increase in personal income tax a further reduction in the repo rate would have been the correct decision.
Venter added that a lower repo rate might have revived construction and other job-creating projects that have been unable to obtain financing due to high interest rates.
“The country is currently sitting with high rates of unemployment and weak economic growth. Cutting the repo rates by another 25 basis points would have had a positive impact on the economy because companies would be standing at greater chances of creating more employment opportunities”
The only way forward is to have an interest rate reduction of at least 50 basis points which will hopefully encourage consumers to spend more and investors to invest. The latter will, in turn, stimulate economic growth.
“The decision to keep the repo rates unchanged will not give a way forward because everything remains in the same state. It leaves people in the same position in their debt, and if people do not have enough money in their pockets, they won’t be able to spend and stimulate economic growth," said Venter.
Thursday’s announcement of the unchanged repo rate supported the faltering rand, with the local unit strengthening against the US dollar.
Venter, however, said that “whether the announcement is political or economic, the markets will always react and after few days the strength of the rand would be back normal”.