SAFTU – the South African Federation of Trade Unions – notes the stubborn inflation which remains high above 7%, and averaged 7,2% in December 2022.
It says: ‘Our members and the working class at large had the most difficult December as prices of food sat at 12,4%.
‘Even though statistics showed inflation easing from 7,4% to 7,2%, food inflation increased by 0,4%. Concretely, this was proved by the Household Affordability Index, which has shown that a cost of household grocery increased by R17 from R4 835,96 in November to R4 853,18 in December 2022.
‘The yearly increase was R577,24, taking the average cost of household grocery from R4 275 in December 2021. In the past 5 years, the costs of household grocery increased by R1 830.
‘Combined with increases in fuel – which has increased more than 70% at the peak last year, and now is still 40% what it was in March 2020 – electricity, transport and other household essentials and interest rate hikes, the burden of the rising cost of living on the unemployed, and ordinary and middle-income earning working people has increased manifolds.
‘Unfortunately, the December inflation statistics will give a further pretext for the South African Reserve Bank (SARB) to hike interest rates.
‘Business Times on Sunday (15 Jan) published opinions of some academics and economists who were giving questions to SARB by anticipating interest rate hikes.
‘The SARB and its army of commentators, all neoliberal monetarists, are using a painful way of hiking interest rate hikes to fight inflation.
‘Because of their belief that “inflation is everywhere and always a monetary phenomenon”, to fight inflation, they always strive to reduce the money in the pockets of consumers who are overwhelmingly working class people.
‘This is done by making financial liabilities such as loans, bonds and credit facilities expensive through interest rate hikes.
‘This method drains money out of people’s pockets, and simultaneously pushes small businesses into bankruptcy, which in turn stimulates unemployment.
‘Like the Chair of the Federal Reserve, Jerome Powell, remarked last year, this is indeed a painful way to fight inflation. Nonetheless, because of their beliefs, they enthusiastically utilise it.
‘But SAFTU has said in the past that the problems exacerbating inflation arise out of a limping economy in which bosses do not want to invest in the productive sectors of the economy.
‘In fact, some of these economists blame lack of “economic growth”, but ironically still favour interest rates as a method to fight inflation.
‘Previously, we have argued that the SARB and Treasury must coordinate to power the idle industrial capacity, which sat at over 20% in 2022.
‘Further, production in all productive sectors and industry must be expanded on a scale that meets the growth of aggregate demand.
‘This will be the most humane and prosperity-creating measure to fight inflation, rather than an unemployment-and-poverty-accelerating method of interest rates.
‘The looming interest rate hikes will worsen the living conditions of workers in terms of debt servicing and living costs.
‘The South African Poultry Association (SAPA) has shown that South Africans are failing to even buy eggs. This is because the rising cost of living squeezes the income of workers, and workers are left with the option of prioritising consumables and debt service.’
Last week, SAFTU spoke out against a huge approved electricity price hike.
It said: ‘In September 2022 when the National Energy Regulator of SA (NERSA) was conducting public hearings regarding Eskom’s proposed 32% tariff increase, SAFTU firmly opposed that travesty.
‘We still oppose the approval of the vast 18,65% tariff hike, as it will devastate the budgets of poor and working people, especially women, and Eskom’s strategy is still aimed at generation privatisation without genuine decarbonisation.
‘And Eskom has been so badly managed and regulated, that giving it more money without full transformation is a recipe for failure.
‘Eskom has blown more than R700 billion on capital expenditure since 2007 but produces 25% less electricity today than then.
‘The money has gone mainly to pay for the corrupt, skorokoro Medupi and Kusile coal-fired power plants, for which Eskom owes most of the R400 billion in its liabilities, to lenders (like the World Bank and Western governments’ import-export banks). These should be cancelled on grounds it is “Odious Debt.”
‘This latest tariff increase should be looked at from a long-term perspective. Combined with increases in the past 15 years, the electricity tariff is more than 800% higher than 2007.
‘Hence electricity has become unaffordable for poor and working-class people. We are especially angry that it is South African women, who mainly take care of our homes, cooking and child-rearing, who must resort to supplementing electricity with firewood, coal, paraffin and gas stoves and heaters.
‘Alternatives to electricity may be cheaper in the short-term but they create indoor air pollution, which is much costlier to health in the medium-term.
‘These tariff hikes are the main contributor to the ever-rising cost of living. In 2022, the average food expenses for a household of four grew by more than R400 to an estimated total of R4 853, whilst electricity consumption of 350 kWh increased by R50 to a total of R787, 50 according to the Household Affordability Index.
‘In addition to electricity and food, fuel has increased dramatically in the past year. Petrol prices (93 unleaded) are still 40% above what they were on the eve of Covid-19 pandemic in March 2020. The fuel price increases have pushed up the prices of commuter transport such as buses and taxis, as well as of home cooking and heating expenses.
‘Interest rates have increased by 350 basis points, causing a 50% percent increase to the prime lending rate in the past year. This increase has made interest on loans and credit facilities much more expensive. Credit cards, home loans and bonds have become prohibitive as a result, triggering more consumer credit defaults.
‘Paying for food and electricity now costs way more than the national minimum wage, earned by about half of the workforce in the country. Additionally, workers’ wages are being suppressed across the economy, and consequently, even the wages of those earning above the national minimum wage are losing their buying power.’
SAFTU is calling on government to ensure that:
- the Eskom board hires a competent management which has the public interest at heart, not vested interests, so as ensure proper maintenance and an end to loadshedding,
- Eskom rapidly introduces renewable energy not through the chaotic IPP but through public ownership, and at a much more rapid rate given the need to decarbonise as rapidly as possible,
- stop Eskom’s unbundling, and take over all projects being developed by IPPs, and
- repudiate the “Odious Debt” incurred during the building of Medupi and Kusile (given Hitachi’s admitted violations of the U.S. Foreign Corrupt Practices Act when giving 25% of its local subsidiary to ANC-linked Chancellor House, which all lenders knew about), and
• fund Eskom to ensure that all cost overruns and debt servicing costs are not passed onto consumers, especially those from the poor and working masses already reeling from load reduction and the demise of Eskom’s cross-subsidies.
