JOHANNESBURG – After announcing the reduction in the repo rate on Thursday, South African reserve bank (SARB) governor Lesetja Kganyago’s move has been welcomed by the business sector.
The cut is set to bring the prime lending rate down to 10%, therefore increasing economic activity and bring much-needed relief to hard-pressed consumers.
According to media reports, the Black Business Council (BBC) has heaped praise on Kganyago’s announcement to cut the repurchase rate (repo rate) by 25 basis points.
This comes after the Governor announced that the monetary policy committee (MPC) unanimously decided to reduce the repo rate by 25 basis points to 6.5 percent per annum, with effect from Friday.
“We welcome the MPC’s decision to decrease the repo rate as this will bring much-needed relief to overburdened consumers and our members who are in the main small, medium and micro-sized enterprises sector with short-long term capital loans,” said Kganki Matabane, BBC chief executive to The Citizen.
Meanwhile, the repo rate has remained unchanged since November last year when the MPC introduced a 25-basis point hike, which raised the repo rate to 6.75 percent.
The reduced repo rate will also bring the prime lending rate down to 10 percent, thereby increasing economic activity and bring much needed relief to hard-pressed consumers.
However, Matabane is of the view that the MPC missed a glorious opportunity to reduce the rate last time they met. In May, the MPC unanimously decided to keep the repo rate unchanged at 6.75 percent per even though it mulled reducing it.
She added that the scope exists for a more ambitious 50 basis point reduction, which would give the economy a proper push, adding that this was the tangible stimulus that the economy needs for growth and employment.
Moreover, the decrease in the repo rate will also give government the necessary window to assess further mitigating policies to steer the economy away from a potential recession.