The South African Federation of Trade Unions (SAFTU) is pleased that the South African Reserve Bank (SARB)’s Monetary Policy Committee did not hike the interest rates. They left the repurchase (repo) rate at 8,25% and the prime lending rate at 11,75%. However, we would have wished for the SARB to decrease the interest rates.
SAFTU is opposed to using interest rates as tools to fight inflation. As we have explained previously “interest rate hikes are inhumane, with dire consequences for the living standards of ordinary workers, creating unemployment, pushing small business traders out of business, and dampening the productive sectors of the economy as a whole.”
That interest rates are inhumane is not a statement we thumb suck, but the SARB and the Governor, Lesetja Kganyago, have admitted and proudly say they are pursuing, albeit in a more technical language. In answers to questions from journalists today, Governor Kganyago said they are committed to a restrictive monetary policy. Restrictive monetary policy means instituting interest rates to the level that they reduce money in circulation, choke aggregate demand and stimulate recession.
The other aspect of reducing aggregate demand that is never mentioned in official briefings by the SARB, as a caution not to infuriate the public, is that they achieve reduction of money in the pockets of consumers by inducing unemployment. So their endeavour for price stabilization is primarily twofold: limiting the buying power of households and starving others. On the one hand, they are reducing the buying patterns of the consumers as more money has to be channeled to servicing debt, and by starving them through inducing unemployment.
In addition, we oppose interest rates because they enrich the financiers at the expense of the working class. It deepens the patterns of wealth distribution that concentrate the wealth in the hands of the few, whilst impoverishing the overwhelming majority.
SAFTU has previously argued that there is a need for coordination between monetary policy, fiscal policy, and industrial policy. This coordination is crucial to powering the industrial capacity that is underutilized, and the labour power that is being wasted through unemployment. The means of production that are not utilized are sitting at 21,9%, and unemployment is over 11 million. Combined, there will be more production, and production of more goods and services can push down consumer prices.
To allow the consumers and the economy to enjoy the deflationary pressure of more production, the government has to reign on monopolies and oligopolies that are using their price-making powers to balloon prices, and thus increase their profit margins. Put differently, we are also arguing that the government should administer price controls to fight inflation.
