The Congress of South African Trade Unions (Cosatu) has expressed concern over the anticipated hike in interest rate after inflation was reported at an all time high in two years.
Inflation spiked to 5% in June from 4.5% in May, pushed heavily by soaring global oil prices, which have surged fuel at the local pump stations. This was compounded by increased housing, utility and insurance costs.
This has raised concern that an increase in inflation triggers an increase in interest rates in effort to control consumer demand to bring in stabilisation.
Matthew Parks, Cosatu parliamentary coordinator, told Sunday World that there were worries about the interest rate hike, which he anticipates to be between 25 and 50 basis points. This comes after a 25 basis point increase to 7% in May, bringing the prime lending rate to 10.50%.
‘Workers are heavily indebted’
He said workers are heavily indebted and this means most of them will have to face the increased pressure that they are already struggling to survive.
Sunday World previously reported that according to the recent DebtBusters Money Stress Tracker, more than 50% people now use nearly half of their monthly salaries to pay off their debts while 72% of the respondents reported experiencing money-related stress.
He argued that wages fail to meet the constantly increasing inflation even with basic needs such as electricity and fuel.
‘External shock’
“It is a difficult issue because the inflation hike is fully an external shock. It is because of the war in the Middle East and there is nothing South Africa can do about it. What we think should have been done is to extend fuel levy relief that the government had put in place for the first three months, that would give some cushion to the society.
“We think they should continue with that for as long as oil prices or fuel prices remain excessively high. We should also look at the longer term on how to reduce public transport, whether its taxis or trains,” said Parks.
He said government should also look into ways to help farmers and shield food from inflation.
Parks said this would also be the time that the shift to electric vehicles is considered as this would avoid the fuel hike shocks. While electricity tariffs keep hiking, Parks said this is rather a long term strategy that would increase demand and force the tariffs down.
- Inflation in South Africa rose to 5% in June, driven by global oil price surges, housing, utilities, and insurance costs.
- Cosatu is concerned about a likely interest rate hike between 25 and 50 basis points, following a 25 basis point increase in May.
- Workers, heavily indebted and struggling with stagnant wages, face increased financial pressure due to rising inflation and interest rates.
- Cosatu suggests extending fuel levy relief and improving public transport to mitigate the impact of external shocks like the Middle East conflict on fuel prices.
- Long-term strategies proposed include supporting farmers, shielding food prices from inflation, and shifting towards electric vehicles to reduce fuel dependency.
Inflation spiked to 5% in June from 4.5% in May, pushed heavily by soaring global oil prices, which have surged fuel at the local pump stations.
He said workers are heavily indebted and this means most of them will have to face the increased pressure that they are already struggling to survive.
He argued that wages fail to meet the constantly increasing inflation even with basic needs such as electricity and fuel.
“It is a difficult issue because the inflation hike is fully an external shock. It is because of the war in the
“We think they should continue with that for as long as oil prices or fuel prices remain excessively high. We should also look at the longer term on how to reduce public transport, whether its taxis or trains,” said Parks.
He said government should also look into ways to help farmers and shield food from inflation.
Parks said this would also be the time that the shift to electric vehicles is considered as this would avoid the fuel hike shocks. While electricity tariffs keep hiking, Parks said this is rather a long term strategy that would increase demand and force the tariffs down.
