COSATU urges MPC to avoid repo rate increase

With the Reserve Bank preparing for its latest interest decision, COSATU has urged the Monetary Policy Committee to avoid any increases.

This is ahead of the announcement of the committee’s decision on Thursday.

The trade union federation argues that the working class is already struggling with the current cost of living, especially with rising global oil prices and their impact.

Further to this, fuel price increases were the biggest contributor to the 0.9% jump in inflation to 4% in April, from 3.1% in March.

“Consumers were dealt a painful fuel price blow in April. The index for fuel rose by 18,2% from March, the steepest monthly increase since the current CPI series began in 2008. Petrol prices were up by 15,2% and diesel by 35,4%… Motorists using diesel felt the most pain. The average price for a litre of diesel jumped from R21,28 in March to R28,80 in April,” read Statistics South Africa’s report on the April inflation figures.

COSATU’s Matthew Parks said working- and middle-class families have had to struggle with this, reflected in increased taxi and bus fares, in addition to electricity tariff hikes.

“Most workers are drowning in debt and borrowing simply to buy food, electricity and transport and service unaffordable debt levels. Those fortunate to have jobs support seven relatives on average. Many workers spend up to 40% of their already meagre wages on transport,” said Parks in a statement.

He said increasing the repo rate would punish South Africans for something out of their control, noting that the rise in inflation “is solely due to the war in the Middle East and not domestic demand”.

“There is nothing that South Africa can do to manage this geo-political crisis of anarchy. Squeezing already struggling workers and consumers would make as much economic sense as decapitating a patient to resolve a migraine.”

He added that an increase to the repo rate would “suffocate” an already struggling economy.

“The economy has been stagnant at 1% for more than a decade. Initial growth projections of an already weak 1.4% have been reduced by the International Monetary Fund to a depressing 1%, far below the 3% plus needed to tackle our single greatest national crisis, our 43.7% unemployment rate.”

At the same time, Parks also called on the Treasury to consider a further extension to the fuel levy relief for the duration of the war. This is as relief to the levy is due to expire in July.

“The Reserve Bank must resist any knee jerk, textbook temptation to raise the repo rate. This would be a devastating blow to workers, consumers, businesses and the economy, when we can least afford it. It must exercise strategic patience, more so as peace negotiations to end the War take place. The Reserve Bank must show solidarity with workers, the poor and the economy by rejecting any increase to the Repo Rate,” said Parks.