SAFTU blames the decline of the country’s Gross Domestic Products (GDP) on the restrictive monetary policy of the South African Reserve Bank. Picture: Bongani Mbatha Independent Newspapers
The South African Federation of Trade Unions (SAFTU) blames the decline of the country’s Gross Domestic Products (GDP) on the restrictive monetary policy of the South African Reserve Bank (SARB).
SAFTU says this was one of the factors sabotaging the economy.
Speaking on behalf of the federation, Trevor Shaku, said their premise was that inflation was always caused by “too much money chasing too few goods”.
“Their solution rests on restricting credit and reducing money supply by increasing interest on debt liabilities for businesses and households and discouraging further credit by hiking interest rates.
“Interest rates are high today, with the prime lending rate at 11,75%. Consequently, this has increased debt and credit liabilities for small businesses, causing them to default, go bankrupt and close businesses.
“The liquidation statistics by StatsSA show that 513 companies have been liquidated between January and April 2024 across all industries. Causes may be multiple, but increasing debt service costs have certainly contributed,” Shaku added.
He said by increasing debt and credit service costs, the SARB was not only sabotaging businesses directly but indirectly too.
Furthermore, the federation’s spokesman said capitalists entered the realm of business to make returns.
“If there is no guarantee for returns, they do not enter business. The first and foremost guarantee for this return is demand.
“Therefore, a monetary policy that fights to reduce aggregate demand is meant to hold the economy stagnant because businesses have reduced consumers for their products.”
EFF Deputy President Floyd Shivambu said the country’s economy was shrinking because the predominantly “white capitalist” establishment refused to invest in the productive sectors of the economy.
“The white capitalist establishment instead chooses to bankroll puppet political parties to defeat organic political formations and now they want to dictate what must happen with political coalitions?
“You have to be deeply ultra foolish to take instructions from the establishment. The 1994 Mandela generation believed these people and our people will remain on the margins of the economy.
“We will not make the same mistake this time. No Oppenheimer puppet should be allowed anywhere close to national political power! We will grow South Africa’s economy without these racists. There are many alternatives,” Shivambu explained.
StatsSA revealed that the GDP contracted by a marginal 0,1% in the first quarter (January–March) of 2024.
This followed a revised 0,3% increase in the fourth quarter of 2023.
“Weaker manufacturing, mining and construction drove much of the downward momentum on the production (supply) side of the economy, while the expenditure (demand) side witnessed a decline across all components.
“Six of the 10 industries on the production side of the economy performed poorly in the first quarter (Figure 1). Manufacturing was the largest negative contributor, declining by 1,4% and pulling GDP growth down by 0,2 of a percentage point.
“Five of the ten manufacturing divisions recording a lacklustre quarter. The automotive sector was the largest negative contributor, pulled lower by weaker demand for new vehicles and transport parts & accessories.
“Mining output contracted by 2,3%, with platinum group metals, coal, gold and manganese ore the largest drags on growth. Construction continued a downward trend, recording a fourth consecutive quarter of decline,” StatsSA said.
The StatsSA further said the construction industry shrank further by 3,1% in the first quarter, pulled lower by weaker economic activity related to residential buildings and construction works.
According to the report, agriculture recorded the largest positive contributor in the first quarter.
“The industry expanded by 13,5%, spurred on mainly by a buoyant horticulture sector that recorded a rise in the production of fruit. Other positive contributors include maize and animal products.
“The trade, catering and accommodation, personal services and finance, real estate and business services industries also registered positive growth, but only just managed to keep their heads above water.
“Trade, catering and accommodation was marginally up on stronger wholesale trade sales, tourist accommodation, and economic activity in the restaurant, catering and fast-food sector.
“The personal services industry was slightly stronger due to positive growth in health and education.”
The Star