By Lunga Mahlangu
When it rains, it pours and pouring it has been in South Africa in the last couple of years, with the country seemingly on autopilot and almost zero political leadership to stabilise the situation or restore confidence in the people.
We often talk (rightly so) about the government's ineptitude and the incompetence of politicians, but we seldom make mention of the preposterous calamity that is the South African Reserve Bank (SARB) and its steadfast intransigence in trying to fit a square peg in a circle. SARB has been consistently underwhelming for a long time now.
To put it bluntly, Lesetja Kganyago and the good folk of 370 Helen Joseph Street in Pretoria are practising voodoo economics.
At least on the surface, that's what it justifiably looks like when one considers the incongruent manner in which the central bank has continued to pursue a monetary policy approach that does not take into account the socio-economic conditions of the people.
How else can one explain the consistent repo rate hikes in an economy whose inflation is mostly cost-pushed, an economy with such a high unemployment rate, almost no productive investments, and low demand?
The SARB has, once again, decided to hike the repo rate. Kganyago announced an increase of 25 basis points in the repurchase rate, which now puts the repo rate at 7.25% and the prime lending rate at 10.75%.
They are literally trying to squeeze blood out of a stone because there really is not any money in the hands of ordinary people right now. A lot of people in South Africa have more liabilities than assets.
To increase the price of borrowing credit makes everything expensive. The situation has a ripple effect on everything, and everyone as the economy contracts and liquidity dries up exponentially.
For those who are not too familiar with the process and its implications, here is how it unfolds at the most basic level:
Whenever SARB raises the repo rate, it increases the cost of borrowing. In turn, this makes credit expensive. By credit being expensive, it means the cost of borrowing is higher. Banks adjust the interest rate on loans, credit cards & mortgages in line with the new repo rate.
In the coming months, there'll be a wholesale repossession of cars and homes as people struggle to keep up with the impact of the new repo rate.
As load shedding continues to deal a significant blow to big and small businesses, more jobs will be lost and incomes will dry up.
The monetary policy approach taken by SARB reeks of structural violence and an aggressive need to forcefully strip South Africans of their hard earned possessions, thereby sending them deeper into the abyss of poverty and destitution.
What Lesetja Kganyago and his colleagues are doing is tantamount to treason, in my opinion. To use monetary policy tools in such a reckless way shows a complete disregard for citizens.
We need to hold the central bank to the same standard as the politicians in government. After all, they are workers of the state and are subject to the same rules and regulations. Therefore there should be no distinction or exemption.
Jerome Powell, in his capacity as chair of the Federal Reserve Bank, appears before congress twice (semi-annually) to deliver the Fed's monetary policy plans and objectives to that country's lawmakers.
The same principle applies to whoever is the chair of the Bank of England (BoE). The treasury oversees the work of the BoE and parliament, as the legislative arm, has the final say over an decision that has to be taken.
But in South Africa, our land, however, Lesetja Kganyago is accountable to absolutely no one. This situation needs to change if there is to be any significant changes in monetary policy.
Lunga Mahlangu is a writer and activist.
* The views expressed here do not necessarily reflect the views of IOL or Independent Media.