The Federation of Unions of South Africa (FEDUSA) has welcomed the announcement of a 25-basis point repo rate cut to 3.5% by the Reserve Bank’s Monetary Policy Committee on Thursday. This is the lowest repo rate in 40 years and has largely been driven by the national effort to soften economic hardships such as massive job losses and ruined businesses caused by the deadly COVID-19 pandemic. The repo rate is the rate at which the Reserve Bank lends money to commercial banks for forward lending to consumers at the prime commercial lending rate which now stands at 7%. The latest cut means the repo rate has now been reduced by a cumulative 300 basis points in 2020.

The cut brings particularly welcoming relief to millions of workers already hard – hit by the COVID 19 pandemic, whilst continuing the battle with inflationary food prices and combatting debt services such as mortgage and vehicle repayments. Ultimately, the killer factor in the South African battle remains the administrative prices such as electricity increases and the lack of electricity recently, that only erodes this type of relief, that has to be rerouted towards supplementary and unbudgeted costs to households and business, in order to keep the lights on.  

 

Issued by The Federation of Unions of South Africa