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The Congress of South African Trade Unions is bitterly disappointed that once again the Monetary Policy Committee of the SA Reserve Bank (SARB) has missed an opportunity to bring down interest rates and give a boost to manufacturing industry and job creation. They have left the repo rate unchanged at 5.5% and even hinted that interest rates will start increasing before the end of the year.

This decision starkly illustrates the growing divergence between the policies of the SARB and the government. President Zuma, in his State of the Nation speech in February, said government is “working within the premise that the creation of decent work is at the centre of our economic policies” and that all government departments, national, provincial and local, will align their programmes with the job creation imperative.
Yet today’s SARB statement seems to have ignored this injunction completely. It was yet again dominated by its overriding concern with the possibility of rising inflation, which it says “would probably average 4.7% this year and 5.7% in 2012, higher than previous forecasts of 4.6% and 5.3% respectively”.
While of course rising inflation cannot be ignored, this small projected increase is a minimal threat to our economy when compared to the huge crisis of a sluggish rate of economic growth, huge levels of unemployment and mass poverty.
That is why job creation is now the central focus of government’s economic policy, including the New Growth Path, which aims to create five million new jobs by 2020. However, as Finance Minister Pravin Gordhan told KZN business leaders in Durban on 18 March, “It is going to be a huge challenge to grow faster, to levels of around 7%, and create millions of jobs”.
Yet the SARB Governor predicts that economic growth will only reach 3.7% this year and 3.9% in 2012. "The domestic growth prognosis has improved and the recovery is expected to be sustained”, she says, but “not at rates sufficient to make appreciable inroads into the unemployment situation in South Africa”.
3.7%-3.9% growth is nowhere near fast enough to bring us anywhere close to the 7% the Minister insists we need to meet the targets set out in the NGP. So why is the SARB not prioritising measures to promote faster growth? As Pravin Gordhan said, “If we want to grow our economy significantly and create jobs, we need to do extraordinary things. We can’t do things as we have done in the past”.
Yet that is exactly what the SARB is doing, repeating the old mantras about fighting inflation and carrying on with its ‘business as usual’ policies based on high interest rates to curb small rises in inflation, rather than lower interest rates to speed up growth, create jobs and start to tackle the top priority – mass unemployment.
As COSATU has repeatedly pointed out, the government’s bold policy is totally out of synch with, and in danger of being derailed by, the cautious, conservative, inflation-targeting policy of the SARB. The policy must be changed – urgently!