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Johannesburg - Business Unity SA (Busa) has called for urgent action on administered prices in response to the South African Reserve Bank's (Sarb's) decision on Thursday to leave interest rates unchanged.
"It is clear that the 'bunching up' and cumulative impact of administered prices are having a serious negative impact on South Africa's economic performance and requires urgent action from the government and private sector alike," Busa said.
The business lobby body said the Sarb's monetary policy committee (MPC) frequently mentioned the role of administered prices - particularly electricity - in discouraging it from cutting interest rates further.
Administered prices are those set by the seller, rather than by market demand and supply.
Busa said the decision to leave the repo rate at 5.5% was not unexpected.
"While Busa believes that the Sarb, in most of its MPC statement today, itself made a good case for a further reduction in interest rates, Busa accepts that there is room for difference of opinion as to whether it should happen now or later.
"The decision is ultimately a judgement call based on the balance of risks."
Deteriorating global economic conditions and growing uncertainty about the eurozone economic outlook require a flexible monetary response.
"Busa is therefore reassured by the Reserve Bank commitment to constantly assess changes in the balance of risks on which monetary policy in South Africa is based."
Busa warned that the Sarb's downward revision of its economic growth forecasts from its previous meeting in September was a "warning signal about the sluggish performance of the South African economy".
Sarb governor Gill Marcus said gross domestic product (GDP) growth was now expected to be 3% in 2011, down from 3.2% in the previous forecast.
It was then expected to be 3.2% in 2012 - revised down from 3.6%.
GDP growth in 2013 was forecast at 4.2% compared to the previous forecast of 4.4%.
"It is clear that the 'bunching up' and cumulative impact of administered prices are having a serious negative impact on South Africa's economic performance and requires urgent action from the government and private sector alike," Busa said.
The business lobby body said the Sarb's monetary policy committee (MPC) frequently mentioned the role of administered prices - particularly electricity - in discouraging it from cutting interest rates further.
Administered prices are those set by the seller, rather than by market demand and supply.
Busa said the decision to leave the repo rate at 5.5% was not unexpected.
"While Busa believes that the Sarb, in most of its MPC statement today, itself made a good case for a further reduction in interest rates, Busa accepts that there is room for difference of opinion as to whether it should happen now or later.
"The decision is ultimately a judgement call based on the balance of risks."
Deteriorating global economic conditions and growing uncertainty about the eurozone economic outlook require a flexible monetary response.
"Busa is therefore reassured by the Reserve Bank commitment to constantly assess changes in the balance of risks on which monetary policy in South Africa is based."
Busa warned that the Sarb's downward revision of its economic growth forecasts from its previous meeting in September was a "warning signal about the sluggish performance of the South African economy".
Sarb governor Gill Marcus said gross domestic product (GDP) growth was now expected to be 3% in 2011, down from 3.2% in the previous forecast.
It was then expected to be 3.2% in 2012 - revised down from 3.6%.
GDP growth in 2013 was forecast at 4.2% compared to the previous forecast of 4.4%.
