Saftu to picket in Tshwane over interest rate hike

The South African Federation of Trade Unions (Saftu) will embark on a strike on Thursday ahead of the announcement of the interest rate hike.

The South African Reserve Bank (Sarb) is expected to increase the country’s repo rate, two months after Sarb governor Lesetja Kganyago announced the repo rate hike of 50 basis points.

In January, the repo rate was hiked by 25 basis points to 7.25%.

Unemployment and poverty

“In our previous statements, we noted that the Central Bankers have continued to band together in using the ‘painful way’ of trying to fight inflation, by hiking interest rates.

“The Saftu strongly opposes the use of interest rates as a method of inflation targeting. Our country is ravaged by high unemployment and poverty, and any responsible central bank will not hike interest rates to induce a recession and unemployment. Such a policy path is not only unreasonable, but treasonous,” said Saftu general secretary, Zwelinzima Vavi.

The union also stated that the hiking of interest rates resulted in the overwhelming working class, who have more financial liabilities and will end up paying more to service their debt.

ALSO READ: More repo rate pain for South Africans expected this week

65% income goes to debt

According to Saftu, people have decided to reduce certain food consumables from their daily food staple, and spend 65% of their income servicing credit.

“Small businesses are also devastated by interest rate hikes. Unable to keep up with rising costs of servicing their loans and credit facilities, small businesses absorb these increased costs through pricing of their products.

“In the intermediate period, interest rates are therefore inflationary. But in the longer term, they default, go bankrupt and retrench their workers,” said Vavi.

Effects

Meanwhile, John Jack – CEO of Galetti Corporate Real Estate, has warned that landlords are going to be caught between a rock and a hard place: they’ll be dealing with rising interest rates and levies on one side, and the need to keep their tenants happy with affordable rental escalations on the other.

Lizl Budhram, head of advice at Old Mutual Personal Finance also warned that tough times were ahead.

“Sharp increases in loan repayments are just part of the cost-of-living nightmare as consumers also face electricity, food, schooling and transportation price increases due to the high inflation rate, which reached 7.1% in March.”

READ MORE: Interest rate hike to hit landlords