Fedusa, Build One SA welcome first interest rate cut in four years

The 25-basis point cut in the repo rate will have a positive effect on workers and households already burdened by the high cost of living and affordability, says the Federation of Unions of South Africa (Fedusa).

Reserve Bank governor Lesetja Kganyago on Thursday announced the central bank’s monetary policy committee (MPC) decision to cut the repo rate to 8%. 

The labour federation said while it understood the MPC’s mandate to maintain price stability, it would have preferred a greater repo rate cut to bring much-needed relief to cash-strapped workers who have endured multiple rate increases. “While we acknowledge the steady decrease in fuel prices and consumer inflation, we cannot overlook the country's expensive cost of living,” said Fedusa.

“The positive impact overall for workers and businesses alike, by spurning cyclical economic activity, is what should inspire the governor and the MPC to be more aggressive in the next round of meetings, taking cognisance of the high cost of living and affordability.” 

Fedusa urged the committee to prioritise the needs of ordinary South Africans, who were already facing the rising cost of living and unemployment. “A balanced approach is needed without being overly focused on the inflation target range, as the aspirations of a developmental state must not be forgotten,” it said. 

Build One South Africa (Bosa), said the first interest rate cut in four years was a long overdue and welcome reprieve. “Leaving interest rates unchanged again would have kept tight the financial noose around the necks of South African households.” 

Bosa said South Africans needed help in lessening the burden of exorbitant cost of living and high levels of personal and household debt. 

The party called for three urgent interventions from government to further alleviate some of the financial drain. These are scrapping the numerous transport taxes — called fuel levies — which make up a third of the total cost of a litre of petrol; expanding the list of zero-rated food items that are untaxed; and freezing the 36.15% electricity price increase scheduled for this financial year.

“Ultimately, the best remedy to address struggling households is to put more jobs in homes. Just 52.4% of households’ main source of income is salaries and wages. This needs to be increased, and to do so we must put at least a job in every home.” 

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