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EFF: EFF statement on the increase of the repo rate by the SA Reserve Bank

Lesetja Kganyago
Photo by Reuters
Lesetja Kganyago

18th March 2016

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The Economic Freedom Fighters notes with great disappointment the decision by the Monetary Policy Committee of the South African Reserve Bank (SARB) to increase the repo rate by 0.25%. Key among the reasons cited by the SARB for the interest rate increase decision is the volatility of the Rand and food price inflation. This decision comes at the back of economic growth forecast that has been revised downwards from 0.9% to 0.8% for 2016. The EFF is concerned by rising food price inflation that affect largely the poor majority, most of whom only survive on social grants. There is no reasonable justification for excessive rise in food prices. What is apparent is that supermarket chains like Shoprite, Pick ’n Pay and others including food producers are driven by greed and profiteering motives without any social consideration to the large majority who live in poverty and struggle to afford food.

A report by the Moneyweb in November 2015 indicated that 100 largest companies on the Johannesburg Stock Exchange (JSE) were sitting on a cash pile of R400 billion, which is not being reinvested in the economy in order to spur growth and absorb the majority of the unemployed in the economy. Among the companies with large cash reserves generated from disgusting greed are supermarket chains such as Pick ’n Pay, Shoprite, Spar and Woolworths who are hoarding over R11 billion. The SARB decision is further punishment on the poor and vulnerable who often have to resort to microloans in order to put food on the table. The EFF rejects unimaginative interventions by the SARB to economic problems that are the consequence of corporate greed and exploitation of poor majority in the country.

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The question of Rand volatility despite other global factors is a domestic problem arising out of the reckless and irresponsible ANC government, especially its illegitimate president, Jacob Zuma, whose criminal decisions have brought us to where we are. The economy is not growing primarily because of the indecisiveness and incompetence of the ANC government to pursue radical economic transformation measures, key among them being nationalisation of strategic sectors and land expropriation without compensation. Immediate economic policy intervention needed is ensure that companies listed on the JSE that are hoarding billions of cash are reinvesting in the economy. The obsession with foreign direct investment is misplaced as there exist a domestic investment capacity.

The SARB is well aware of that the risk of stagflation, a situation of rising inflation, unemployment and declining economic growth, is materialising; thus rendering their decision to hike interest rates futile and counter-productive. The EFF offers the SARB free monetary policy advice that interest rates must be left unchanged going forward in order to spur growth and for the Minister of Finance, Pravin Gordhan, to immediately formulate measures to arrest corporate greed and exploitative profiteering that is causing unwarranted food price inflation. More importantly, that money sitting idling bank accounts of listed companies must be reinvested in the economy.

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The announcement by the SARB governor, Lesetja Kganyango, reaffirms the position of the EFF that the SARB must be nationalised given its strategic role in the economy and for inflation targeting to be abandoned in favour of incentivisation of the increased money supply into productive and manufacturing sectors of the economy that should create jobs and grow the economy without exploitative profiteering.

 

Issued by EFF

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