Tight monetary policy putting a handbrake on much-needed economic growth

Tight monetary policy is now putting a handbrake on much-needed economic growth, to the detriment of business growth and job creation.

The Cape Chamber of Commerce and Industry adds its voice to the large number of economists calling on the South African Reserve Bank for a repo rate cut. High interest rates persist as a ‘binding constraint’ on the business sector at a time when the economy urgently needs forward momentum in the form new investment. There is now a groundswell of expert opinion in favour of interest rate cuts and an end to the Reserve Bank’s conservative fiscal management.

Businesses big and small are less willing to invest at the high cost of financing ventures. The Reserve Bank should therefore give effect to President Cyril Ramaphosa’s call for more job creation and public-private partnership; if government wants partners to drive economic growth it needs to create an enabling environment via measured monetary policy.

Several domestic market indicators suggest a rate cut is now overdue. The latest ABSA Purchasing Managers’ Index (PMI) rose above 50 in July, indicating a strong start to the third quarter. This was based on rising optimism of economic prospect and solid domestic and external demand. With inflation now intact, relative currency stability and a reprieve from load shedding add credence to those calling on the Reserve Bank to make a decision in favour of business growth.

Jacques Moolman
President of the Cape Chamber of Commerce and Industry