ANC secretary general Fikile Mbalula said the South African Reserve Bank’s (SARB) current trend of rising interest rates is untenable and hampers the country’s economic growth.
In a media briefing on the outcomes of the recent National Executive Committee (NEC) meeting and Election Manifesto Review, Mbalula said the NEC had directed Finance Minister Enoch Godongwana to “urgently hold discussions” with the SARB.
The minister must speak with the Reserve Bank and “explore other measures to manage the current economic challenges other than raising interest rates”.
The SARB is currently in a hiking cycle which began in November 2021. Since the cycle started, the Reserve Bank has implemented ten consecutive interest rate hikes and a cumulative 475 basis points, bringing the repo rate to 8.25%.
These hikes were implemented to rein in the country’s high inflation rate and bring it back within the SARB’s target range of 3% to 6%.
While local and global inflation has been sticky, the SARB’s efforts have yielded positive results in the past few months, with both April and May’s CPI data showing a downward trend in inflation.
Mbalula said the NEC is concerned about the country’s inflation and its effect on the cost of living. He said persistent load-shedding and the disruption to global food supplies due to the Russia-Ukraine war have put pressure on domestic inflation, thereby accelerating the rise in the cost of living.
In the medium to long term, the NEC plans to curb the rising cost of living by focusing on economic growth based on expanded domestic production and ending load-shedding.
This is the most sustainable way of responding to rising living costs and should stabilise productivity in South Africa, reduce running costs for businesses and, therefore, decelerate inflation.
“Similarly, the opening of global food supply chains as negotiated by the Africa heads of state mission in Russia and Ukraine will help bring global inflation under control by the fourth quarter of 2023,” he said.
However, in the short term, the NEC agreed that “urgent intervention must be pursued to rescue the South African working and middle classes from the rising costs of living.”
The NEC further noted that the Reserve Bank is mandated to pursue price stability in the interest of balanced growth.
However, “the NEC is concerned about the current trend of rising interest rates and their inflationary impact on the cost of living by depleting disposable incomes of millions of our people who are already facing severe financial pressures”.
Mbalula said this “trend” subdues consumer demand, a critical element for economic growth. Furthermore, the NEC does not believe this “untenable trend in rate hikes is in the interest of balanced growth”.