Lower inflation provides some relief for workers, but more is needed to restore them to financial health
|Published
By Solly Phetoe
Workers received good news this week with inflation falling from 4.4% to 3.8% since last month. This provides welcome relief to millions of highly indebted workers struggling to cope with rising costs of living over the past two years and salaries that barely kept pace with these.
Inflation peaked at 7.8% over the past two years due to the spike in international oil prices following the war in Ukraine. This had a devastating impact upon fuel importing economies like South Africa, making the cost of transport, food, electricity and other essential goods much more expensive for workers already bleeding from a weak economy, low wages, high unemployment and endemic poverty.
Further pain was felt by working class families and the economy with the 475 basis points hike in the repo rate by the SARB to tackle the inflationary burst.
This made it even more difficult for workers to service their home loans and meant less money to take care of their families or spend in the economy.
Whilst welcoming this 4% fall in inflation and the relief it provides, including the first cut in the repo rate in September, it is important to remember inflation hits workers and the poor the hardest.
First, workers, due to the meagre wages paid to them by callous employers, have less disposable income to withstand any knocks.
Second, the goods that workers spend most of their money on tend to have inflation rates far higher than the consumer price inflation.
Electricity for example went up by 18.65% last year and 12% this year, with a requested 36% increase next year.
The fall in CPI, is good news for millions but it is not enough to heal their financial wounds, nor to release sufficient cash to stimulate the economy.
With the Israeli apartheid regime unleashing wars of aggression against the Palestinian and Lebanese people and across the Middle East, we should not assume international oil prices will not increase again.
It is critical we do more to cushion workers and the economy from inflation, as well as reduce our entrenched levels of poverty and inequality.
Whilst there is little we can do about the crises in the Middle East and Europe, there are several high impact interventions the government can affect.
First is for the SA Reserve Bank to reduce the repo rate by 50 basis points at its Monetary Policy Committee meeting in November.
This will give immediate relief to millions and be a positive boost for workers’ disposable income in the run up to the critical festive period when the retail and hospitality sectors need to do well to create badly needed jobs.
Anything less than a 50 basis points cut will be unacceptable.
Government in the Medium-Term Budget Policy Statement, due to be tabled at Parliament on Wednesday, needs to act decisively with a bold set of interventions to spur the economy and give relief to workers and the unemployed.
Key interventions needed are as follows. Give more support to Eskom to plug its financial leakages, e.g. tackling municipal debt owed to it; to end its unhealthy dependence upon double-digit tariff hikes.
Similarly, more interventions and support are needed to return Transnet and MetroRail to full capacity to shield food and rail commuters from inflation.
Discussions need to take place on a path towards giving support to the taxi industry as the backbone of public transport in exchange for the formalisation of this important sector and the recognition of its workers’ rights.
President Cyril Ramaphosa made a bold and progressive commitment to review the fuel tax regime, and the basket of essential goods exempt from VAT.
Lowering the fuel price will give invaluable relief to commuters. Extending VAT exemptions to key food and other essential items, e.g. locally produced poultry and school uniforms amongst others, will help many cover basic needs, boost nutrition and thus improve education outcomes for learners and students, and support local industries and jobs.
Government plans to integrate PetroSA and the Central Energy Fund into a single state-owned SA Petroleum Company need to include ensuring the economy rapidly expands it oil refinery capacity to avoid the dangers of fuel shortages.
Whilst these measures will help reduce inflation and grow the economy, solidarity must be maintained and expanded by the ANC led government to the unemployed through ensuring social grants are protected from inflation, the SRD Grant is raised to the Food Poverty Line and its recipients linked to skills and employment programmes, and the Presidential Employment Stimulus is drastically scaled up to accommodate at least 2 million annual participants to help break the back of youth unemployment.
Cosatu has presented to Treasury and Parliament proposals for the next round of Two Pot Pension Reforms.
These need to be expedited, in particular ensuring workers retain full access to their savings when they lose their jobs, members can choose to transfer savings from their vested pot to the new two pot and thus access greater relief to settle debt and other financial emergencies and review low-income workers’ painful tax burdens.
These interventions are critical and ones that our ANC led government must pursue and where on many fronts, it has made welcome progress and on others, more needs to be done.
Business too must play its role. The days of paying workers peanuts and CEOs obscene fortunes need to come to an end.
Workers cannot be productive if they must walk long distances to work because they cannot afford transport, or they don’t have money to purchase the food and medicines necessary to be healthy.
Similarly, the economy cannot grow if the goods the economy produces are too expensive for ordinary consumers.
The fall in inflation gives comfort to workers. What is needed now is to ensure the working class is protected from future spikes in inflation, we boost workers’ wages, reduce inequality and poverty, spur growth and slash unemployment.
Solly Phetoe is general secretary of Cosatu.
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