Business sector hails unchanged repo rate decision

Governor of the SA Reserve bank Lesetja Kganyago.
Governor of the SA Reserve bank Lesetja Kganyago.

The metals and engineering sector has welcomed the SA Reserve Bank's decision to keep the repo rate unchanged at 6.75%, describing it as good news for "beleaguered businesses".

The Steel and Engineering Industries Federation of Southern Africa (Seifsa) said increasing operational expenses, low domestic demand and the weaker exchange rate had, among other factors, put pressure on the sector, and a stable interest rate would provide a "reasonable degree of certainty".

"The generally weaker exchange rate, increasing logistics costs and rising input costs compound the cost of doing business locally,” said Seifsa Chief Economist Michael Ade.

The prime lending rate also remained the same at 10.25%.

Ade said that external trading factors, as a result of "constricted global growth expectations due to trade war risks" had also added pressure.

The bank last hiked the repo rate in November 2018 from 6.5% to 6.75%.

The decision also bodes well for small and medium enterprises as well as exporting companies, which according to the federation are sensitive to interest rate changes.

The rates decision has also been hailed by the Black Business Council, who noted that the first quarter of the year had been particularly taxing on the pockets of consumers, with three consecutive fuel hikes and higher electricity tariffs.

"The unchanged repo rate will give government alongside business, labour and community the necessary window to implement mitigating reforms to address our slow growing economy," said Sandile Zungu, the council's president.

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