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The Federation of Unions of South Africa (FEDUSA) is pleased with the unchanged repo rate as announced by the South African Reserve Bank (SARB) yesterday.  However, FEDUSA remains convinced that more attention should be given to economic growth and the much needed creation of more jobs in South Africa.
 
“We are cautiously positive about the unchanged rate,” said FEDUSA General Secretary Dennis George.  “On the other hand, we are mindful that our members are forced to tighten their belts due to rising fuel and food prices.  Working people have absolutely no control over fluctuations in the oil price, and our uncompetitive market uses such opportunities to punish consumers with unnecessarily exorbitant price increases,” he added.
 
FEDUSA believes that the SARB should, through applying monetary policy provide the necessary support to grow our economy and create more jobs.  Finance Minister Pravin Gordhan on numerous occasions emphasised the irrefutable importance of economic growth, once suggesting a new "national intent" of pursuing an economic path that targets sustained gross domestic product (GDP) growth of 7% for a period of 20 years.
 
“Although the MPC has always claimed an accommodative monetary policy stance, FEDUSA still continuously campaigns for anchoring inflation but also stimulating growth and employment.  We have also argued that simply looking at inflation was both simplistic and unfair, in that it punishes consumers twice – first through price increases and then through rising interest rates.  While we understand that inflation needs to be anchored to protect savings and capital, we also need to protect working people who struggle with expensive credit for necessary items such as houses and vehicles”, said George.
 
Notably Reserve Bank Governor Gill Marcus cited variables such as high food inflation, a weaker rand and low domestic output as chief considerations of the Monetary Policy Committee when deciding to leave the rate unchanged.  She alluded to reduced output and export volumes due to the current labour market instability and strikes in the country, and said that inflationary risks were heightened by a further depreciation of the rand exchange rate and the impact of the re-weighting and re-basing of the CPI basket by Statistics South Africa.
 
“We are fully aware of the negative effects of labour unrest on foreign investment, economic growth and job creation.  However, we still believe in the principle of fair wages and the positive effects on consumer spending patterns.  It is important to note that our economic growth was already sluggish before the recent uprisings, and we still failed to create more jobs,” said George.
 
Still, inflation is expected to average at 5.6 percent in the final quarter of 2012, and it is expected to average at 5.5 per cent in 2013, and five percent in 2014.  However, the global economic outlook deteriorated further leading to further concerns regarding the unresolved sovereign debt crisis.
 
“We must also have due regard for the effect of the euro crisis on our vulnerable export-led industries.  There are key industries that are really feeling the pinch due to the pressures on our European trading partners and these are also matters outside of our control,” concluded George.