SACP calls for monetary policy change and for the Reserve Bank to play a developmental role in the state

[SACP Communications]

South African Communist Party

SACP calls for monetary policy change and for the Reserve Bank to play a developmental role in the state

Saturday, 2 August 2025: The South African Communist Party (SACP) calls for the urgent repositioning of the South African Reserve Bank to play a developmental role in the state. This must include employment as part of its mandate, explicitly, and holding it accountable for the failure to achieve the constitutional mandate to ensure balanced and sustainable growth.

Instead of the pursuit of a developmental role, while announcing a token interest rate reduction of only 0.25 per cent on Thursday, 31 July 2025, the Reserve Bank declared, obviously using different words, that it will, going forward, adopt a more conservative stance within the narrow policy of inflation targeting regime. The 3 per cent target may seem to fall within the controversial 3 to 6 per cent range set by the National Treasury, but it represents a shift towards even greater conservatism within the narrow policy of inflation targeting. There are more problems with this, of which three are worth highlighting, at least for now.

First, it is not the mandate of the Reserve Bank’s Monetary Policy Committee to set monetary policy. That mandate belongs to the executive authority. The conduct of the Reserve Bank’s Monetary Policy Committee is therefore deeply problematic and demands scrutiny.

Second, the Reserve Bank failed to state how it intends to achieve the new target. From experience, we know its method will involve raising interest rates, with devastating consequences for both economic and social development.

Third, high interest rates strangle the economy. They do not unlock productive investment but instead enrich finance capital monopolies while suffocating workers, households, co-operatives and small enterprises. Under the regime of high interest rates and associated hikes, families are forced to pay more for mortgages, vehicles and basic loans, reducing their ability to meet daily needs. Co-operatives and small enterprises are pushed to the edge as the cost of credit becomes unbearable. The outcome is stagnation, which we have faced for a long time now, and persisting high rates of unemployment, poverty and inequality.

The high interest rates regime serves not the needs of society but the greed of finance capital. It protects elites who profit from debt while the majority endure suffering. Companies retrench workers, the government spends more on debt servicing than on communities, manufacturing de-industrialises, and sectors such as construction are paralysed. The economy is throttled, living standards decline and inequality intensifies. High interest rates are not neutral instruments of policy but weapons that entrench underdevelopment and crush the aspirations of the working class and poor.

Instead, South Africa needs a monetary policy that confronts unemployment and poverty head-on. Over 12 million people remain without work or have given up looking for it. A just policy would support industrialisation and national productive development to create employment on a mass scale. Economic policy must serve the people, not the financiers. It is time to demand a system that prioritises human needs and development over the profits of a few.