Business call for more repo rate cuts to save economy from effects of Covid-19 pandemic

Business Unity SA says recent cuts were remarkable, but further cuts may be needed

19 April 2020 - 14:38
Sipho Pityana.   Picture: LEON SADIKI
Image: LEON SADIKI Sipho Pityana. Picture: LEON SADIKI

The Reserve Bank will have to make another and more significant intervention amid fears that between one and three million jobs will be lost in the coming months due to economic inactivity as a result of the national lockdown.

This is according to Business Unity SA chair Sipho Pityana and Black Business Council president Sandile Zungu.

In separate interviews with TimesLIVE, the two said that they expect that the central  bank would make further interventions as the Covid-19 pandemic decimates the economy.

Pityana said his expectation would be a further adjustment of interest rates which have now come down by a total of 200 basis points since the start of the Covid-19 crisis.

“The Reserve Bank is in a very difficult position from my perspective. I don’t subscribe to the idea that monetary policy is the panacea to resolving broader economic problems. We have to look at growing the economy, stimulate growth, generate revenue.

“But the steps which have been taken in the last period in terms of reducing interest rates within a month, twice, by 200 basis points is remarkable. From everything we see of the performance of this economy, unless there are exogenous factors, we expect that the Reserve Bank may have to bring the interest rate down further,” Pityana said.

Zungu on the other hand said that the bank would have to steer away from traditional interventions in order to make a meaningful contribution in the coming months.

“The Reserve Bank has reduced interest rates twice but it is not enough. I think the monetary form of economic stimulation has got to be augmented by the fiscal kind of stimulus. Others will call it, printing the money. The Reserve Bank has to look into the efficacy of that approach. We have confidence in our Reserve Bank. It has men and women of great substance who love the country and who want to find the best solution. We just encourage them to think outside the box and outside the normal or traditional guidelines of inflation targeting,” Zungu said.

“These are emergency times that must factor issues such as employment. If our economy is going to have as much as 50% unemployment in the short term, that is a crisis of unprecedented proportions. We may bounce back from a contraction very quickly but it is not a given either. We must do something about it and we must actively and objectively play with interest rates and we have got to also inject or pump money into the economy,” said Zungu.