COSATU on interest rates

The Congress of South African Trade Unions deplores the Reserve Bank Monetary Policy Committee’s decision not to cut the repo rate but keep it at its current high level. The MPC has yet again today missed an opportunity to give a boost to economic growth and strike a blow for job creation.

President Zuma in parliament yesterday warmly welcomed the joint statement by manufacturers and the three trade union federations, Cosatu, Fedusa and Nactu, on industrial economic policy interventions needed to create decent jobs, which was signed two days ago.

That joint declaration identified one of the most serious problems facing our economy as that the unavailability of finance, and the exorbitant level of lending rates by the financial sector, which make borrowing prohibitively expensive.

This has been one of the main causes of the decline of manufacturing industry and the massive, and still rising, levels of unemployment. Another 171 000 jobs disappeared in the first quarter of 2010 alone and the revival of growth is too weak to stem the tide.

The declaration proposes a range of macro-economic and industrial policy interventions to put us on a new growth path, broaden our industrial base, promote productive investment, and build our domestic economic capacity.

It strongly supports government’s industrial policy proposals in the recently released IPAP 2 [Industrial Policy Action Plan], but, most importantly, calls for a supportive macro-economic environment to ensure the success of these interventions. One of its key demands is for a reduction in real interest rates, and introduction of concessional finance for productive investment.

Yet the MPC would appear to be oblivious to this groundswell of support for new policies and is still mired in its old, conservative monetary policies.

Such policies threaten to undermine progressive, expansionary programmes like IPAP2, and clearly contradict the ANC manifest commitment to ensure that “fiscal and monetary policy mandates including management of interest rates and exchange rates need to actively promote creation of decent employment, economic growth, broad-based industrialisation, reduced income inequality and other developmental imperatives.”

The joint declaration, welcomed by President Zuma, insists that the measures it proposes, including a more progressive and expansionary monetary policy “are critical if we are to stem the massive job loss, the threat of deindustrialisation, and revive and expand the productive capacity which has been seriously eroded by the economic crisis.”

That is the approach we demand from the Reserve Bank MPC and will continue to campaign for a programme of substantial cuts in the repo rate and other measures at the Reserve Bank’s disposal to restructure the economy and create jobs.

Patrick Craven (National Spokesperson)
COSATU