Rate cut 'too little, too late'

Cape Town - The repo rate cut of 100 basis points, while welcomed by the trade union movement, is much too little and far too late, according to the Congress of South African Trade Unions (Cosatu).

"The monetary policy committee of the Reserve Bank has still not grasped the seriousness of the world economic crisis and the impact that is now being felt in South Africa," Patrick Craven, the Cosatu spokesperson, said on Thursday.

"Thousands of jobs are in jeopardy. The Reserve Bank governor, Tito Mboweni, has conceded that domestic output and growth are declining or negative. Yet he has once again missed a great opportunity to deliver a radical cut in interest rates of at least 200 basis points, which would ease the burden on struggling businesses, prevent retrenchments, promote new investment and give the economy a shot in the arm."

The unionists say that unless the Reserve Bank changes its policy, it could push South Africa into a disastrous economic recession, thousands more lost jobs and millions more doomed to poverty and despair.

Craven added that other countries have slashed their interest rates. The UK's is currently 1.5% and Japan's a mere 0.1%. Yet the SA Reserve Bank still maintains a high rate of 8.5%.

"The MPC is still clinging to the notion that monetary policy must be based primarily on inflation-targeting, despite the fact that the rate of inflation is going down," he said. "Of course Cosatu would not welcome rising inflation, which hits workers and the poor hard, but today the biggest worry is not inflation but economic recession and the developing job-loss bloodbath."

The federation repeated its demand for an interest-rate strategy based on targeting not only inflation but economic growth, quality job creation and poverty eradication.

It insisted that this would be totally in synch with the policies adopted by the ANC's Polokwane Conference, incorporated into the ANC election manifesto and now adopted by the government led by President-designate Jacob Zuma. They are also the policies adopted by business and labour at a Presidential Joint Economic Working Group meeting in December 2008.

- I-Net Bridge