SARB Governor Lesetja Kganyago announced repo rate increase of 75 basis points. File picture
IT SEEMS as if the tough times faced by South African consumers in this challenging financial climate will not be letting up any time soon as neither the SA Reserve Bank (SARB) nor Statistics South Africa (StatsSA) has any good news for consumers this week.
The SARB’s Monetary Policy Committee (MPC) this week announced an increased repo rate by 75 basis points, meaning that the prime lending rate grows from 9.75% to 10.5%. This decision further stretches workers’ pay cheques and heightens the affordability crisis.
Meanwhile, StatsSA announced that the Consumer Price Index (CPI) ticked up to 7.6% in October, mainly driven by basic goods and services.
This means that consumers will have the unfortunate task to tighten their purse strings as they enter the festive season and second-guess any substantial purchases going into 2023 and 2024.
ActionSA president Herman Mashaba expressed concern over the devastating economic consequences that South Africans are facing with no sign of relief from the country’s ruling party, the ANC, to rectify the economic crisis.
Mashaba said in a statement that this week’s decision with Eskom’s requested 32% tariff hike, despite the economic damage caused by ongoing load shedding, and the ever-rising cost of living, the knock-on effect on the quality of life of all South Africans would be devastating.
“Ultimately, more people will be plunged into desperate situations, increasing the vulnerability of our people that have already had to endure so much over the past years,” Mashaba said in a statement.
“We cannot ignore the fiscal reality our government faces: thanks to decades of ANC mismanagement our government does not have any funds or fiscal room to lighten the financial load of poor South Africans with government-funded relief efforts.
“While the high level of inflation is a global phenomenon, responsibility for South Africa’s lack of options to support consumers lies squarely at the feet of the ANC,” he said.
In more bad news for workers, economists anticipate the repo rate will likely increase by another 50 basis points in January.
Abigail Moyo, spokesperson for the trade union UASA, said higher prices combined with higher interest rates meant a double blow to workers’ budgets that would wallop consumers, affecting their desired and planned spending on Black Friday and subsequent outlays in the festive season.
“UASA encourages its members and fellow South Africans with home and other loans to tighten their belts to keep abreast of this financial challenge and do their utmost to balance their needs and wants with their disposable income,” she said.
High Street Auctions director Greg Dart said the government was placing the country’s economy in an extremely perilous position.
“Load shedding isn’t the exception anymore, it’s the norm and it’s costing South Africa an estimated R4 billion a day. How can the private sector sustain itself and its workforce under these conditions, especially given the added pressure of headline inflation remaining high and growth forecasts diminishing almost daily?
“The government clearly has to hedge against inflation, but that must be weighed against what the population can bear without the economy going into free fall. Where is the government going to draw the line; a line it should have thought to draw five years ago?”
Dart said that the increased repo rate showed that the corporate sector would have to look inwards to safeguard commerce and employment and ensure long-term commercial sustainability.
From small retail expenses to property purchases or travelling to holiday destinations, the new rates show that South Africans are living in volatile and uncertain times, and the factors that drove the current inflationary environment are still very much at play.
SARB Governor Lesetja Kganyago made the announcement on November 24 following the MPC’s final meeting for the year. He said that the hike came amid the high levels of inflation and the weakened economy in South Africa affected by load shedding.