Rate hike: consumers carrying the cost of corruption and poor policy decisions

Today’s decision by the Reserve Bank to increase interest rates will have the biggest impact on the poor and is the result of poor policy decisions made by the national government, Minister of Economic Opportunities in the Western Cape, Beverley Schäfer said.

“We believe that this crisis has been created in Pretoria as a direct result of corruption which had cost the country billions of Rands and  bad policy decisions like land expropriation without compensation,” Schäfer said.

“If the country’s systems and state owned enterprises had been properly operated over the past nine years, this rate hike would never have been necessary,” she said.

The rate hike is likely to impact the poor and middle class the most, as it becomes more expensive for them to service their debt.

“This is just the latest in a series of blows the consumer has had to shoulder this year including several consecutive fuel price hikes which have put the cost of fuel at an all-time high, and a regressive VAT increase. Eskom has also requested a 15% electricity price hike over the next few years. Consumers are being punished for the national government’s poor decision making, ” Schäfer said.

South Africans are paying more for petrol not just because the cost of oil has increased, but because economic decisions had seen the Rand devalue, and the cost of imports increase as a result.

Schäfer said that the rate hike had not been an attempt to reign in consumer spending, as local inflation had been subdued, and had registered within the six percent band.

“What consumers are essentially paying for is imported inflation because the currency has been devalued. Consumers are paying more for imported goods and fuel and then being further punished with interest rate hikes,” Schafer said.