The South African Reserve Bank has, once again, decided to hike up the repo rate. Governor Lesetja Kganyago recently announced an increase of 25 basis points in the repurchase rate, which now puts the repo rate at 7.25% and the prime lending rate at 10.75%.
What has become clear for everyone to see is that the central bank doesn’t care about the people of South Africa or the impact of such reckless monetary policy on their livelihoods. What it cares about, beyond inflation targeting, is keeping up with the West, particularly the script of The Federal Reserve Bank of New York (NY Fed).
One of the problems we’re having is that people are not aware of the kind of power that the state (through a state organ called the central bank) has over their lives. A decision taken by a few individuals at a macroeconomic level can have a major effect on the trajectory of people’s lives. To add to this, a combination of bad fiscal and monetary policy is a recipe for disaster.
There is no logical argument that can be advanced for the decision(s) by SARB to act in the manner in which it does. All it shows is a complete disregard for human life and an absolute care for a neoliberal economy that benefits “investors”, bankers and politicians who have shareholdership in the SARB and other financial institutions.
If the list of those 800 so-called “private” shareholders can be made public, it would reveal the extent of the rot, not only as a result of the revolving door policy between the economic cluster and financial institutions, but also politicians who are still occupying seats in government as well as those who do the lobbying for corporate financial interests from the comfort of their homes.
South Africa is a messy crime scene and banks are largely responsible for the excessive damage. The rampant financial and economic crimes that are committed against the citizens on a daily basis by the banking cartel and its partners is something that deserves a tribunal of its own.
The role of the South African Reserve Bank in the crime currently against the people should be scrutinized closely. The monetary policy response of SARB is only concerned with following the NY Fed’s direction.
As Jerome Powell and co raise rates faster than us, “investors” turn to the strategy of selling low interest rate yielding Rands and they buy higher interest rate yielding Dollars. This situation eventually leads to the Rand falling.
So, to try and arrest this situation, Kganyago has been following the NY Fed and raising the repo rate as well. This is hurting the economy as it makes borrowing less attractive.
Commercial banks and the entire finance sector stand to benefit more from these rate hikes. It is the people who will suffer the most.
We need to put an end to the great assault that is waged on the working class and the poor by an insensitive government and an even more insensitive central bank that is only concerned with matching up the trends of the NY Fed, even when it goes against the socioeconomic conditions of society.
The South African Reserve Bank must be forced to make structural reforms and one of these include expanding its core mandate to include full employment. Changes must be done one way or the other!
~ written by Lunga Mrhetjha, Political Analyst and Social Commentator. Get more insight from him at patreon.com