A second break or even a reduction in the interest rate in September could have a positive influence on business and consumer confidence and boost economic growth.
After ten consecutive interest rate hikes and the monetary policy committee’s decision in July to leave the interest rate unchanged, inflation has fallen back to within the Reserve Bank’s target band of between 3% and 6%.
“The rising interest rates together with load shedding, more expensive power, food and fuel are putting great pressure on companies and individuals,” says Thys van Zyl, CEO of Everest Wealth. “A second break or even reductions in the interest rate in September and November will give consumers a much-needed break – especially for those with debt.”
The high interest rates also cause household spending to be strangled and a break can help consumer spending and improve households’ ability to service their debts in time for the December festive season.
“Consumers have had a hard time in the past year and a half and are struggling to keep their heads above water. A reduction in the interest rate can help them breathe a sigh of relief and stimulate economic growth.”
Any further interest rate hikes will simply be to try to protect the value of the rand and this is not the solution as political and economic instability bears the blame and ultimately consumers pay the price.
“There is hope for the economy, but the government will have to urgently intervene and focus on this. Loadshedding continues to cripple the economy while the decaying transport network is costing the country’s economy billions of rands in lost exports and hurting economic growth. The government must get reforms in place to remove logistical constraints and solve the power crisis so that the economy can grow.”
Poor economic management has led to seemingly endless challenges and the private sector must be allowed to step in where incompetent state enterprises have failed in order to improve the country’s infrastructure and power grid and grow the economy.
“Where the government fails, the private sector intervenes with better solutions. The government must remove itself as the biggest obstacle and create the environment for the private sector to invest and inject capital.”