SAFTU slams reserve bank's decision not to slash repo rate

JOHANNESBURG - Some unions have hit out at the South African Reserve Bank's decision not to slash the repo rate on Thursday as consumers continue to buckle under debt and efforts to jumpstart the economy stall.

The central bank's monetary policy committee (MPC) kept the repo rate unchanged at 7.5%.

The MPC's caution follows geopolitical instabilities, trade wars, and other domestic risks.

But the high borrowing costs mean households with debt still have no reprieve on the repayment costs.

General secretary of the South African Federation of Trade Unions (SAFTU), Zwelinzima Vavi, said poor households were paying the highest cost for restrictive monetary policy.

"We are disappointed that the monetary policy committee did not see a reason to reduce significantly the interest rates. In light of what we thought was going to change from the fact the minister of finance in presenting the budget sort of went softer on budget cuts, signalling that the government was recognising that the budget cuts, the fiscal policy and monetary policy have not helped the economy grow."

But Standard Bank Group chief economist, Goolam Ballim, said the reserve bank had to look at the bigger picture.

"The reserve bank has argued that it cannot be asked to carry and shoulder a disproportionate burden in injecting in the economy because there are other more meaningful headwinds and secondly, interest rates can only do so much before you are pushing on a string. In other words, low interest rates can still have a very mute or only modest impact when you are bedevilled with friction in the political environment or logistics and network constraints."