SAFTU march in Cape Town during the National Shutdown on 24 August 2022. Photo: Storm Simpson/The South African.
SAFTU opposes interest hike, citing devastating impact on workers and small businesses
SAFTU General Secretary Zwelinzima Vavi said interest rate hikes contribute to worsening living standards and increased unemployment.
SAFTU march in Cape Town during the National Shutdown on 24 August 2022. Photo: Storm Simpson/The South African.
The South African Reserve Bank (SARB) hiked the interest rate by 25 basis points on Thursday, 26 January. One of the country’s leading trade union federations, SAFTU, opposed the increase, saying it would be a devastating blow to workers and small businesses.
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INTEREST RATE HIKE OPPOSED BY SAFTU
Thursday’s interest rate hike was the eighth consecutive increase. The repo rate now sits at 7.25% while the prime lending rate is up to 10.75%.
The SARB cited high inflation, the impact of load shedding on the economy and other factors as the reason for the increase.
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“This interest rate means the rates have increased by a cumulative 375 basis points since the so-called normalisation of policy rates began in November 2021. In other words, the interest rates have grown by 107% in the past fourteen months,” said SAFTU General Secretary, Zwelinzima Vavi.
The trade union federation said interest rate hikes have contributed to the worsening living standards of workers, in that it makes the cost of borrowing higher and forces people to decide which household essentials they need to prioritise and which they need to drop when spending.
“On small businesses, the impact is also devastating. Unable to keep up with rising costs of servicing their loans and credit facilities, small businesses absorb these increased costs through pricing of their products. In the intermediate period, interest rates are therefore inflationary,” said Vavi.
He added that eventually businesses go bankrupt and retrench workers or close down. “In this way, interest rate hikes are creating unemployment.”
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