The Steel and Engineering Industries Federation of Southern Africa (SEIFSA) welcomes the South African Reserve Bank’s decision to cut the repo rate by 100 basis points to 5.25 percent, the Federation’s Economist, Marique Kruger, said this afternoon.
Speaking after the Governor’s announcement, Ms Kruger said the lowered interest rate is encouraging and has the potential of stimulating consumer demand and boosting production towards better growth.
“The decision provides some relief for businesses which continue to operate in a tough economic environment, underpinned by non-descript domestic growth, subdued demand, high unemployment, volatile output, high unit labour costs and poor business activity levels,” Ms Kruger said.
She added that the monetary policy intervention is welcome, especially given the negative Gross Domestic Product growth in the third and fourth quarters of 2019, which effectively catapulted the South African economy into a technical recession. The decision by the Reserve Bank is likely to stimulate demand and improve an ever-weakening domestic outlook
Ms Kruger said the lowered interest rate will benefit key industries which are drivers of domestic demand and supply patterns for the metals and engineering sector, in the process boosting overall demand for its intermediate products.
Moreover, it would help struggling companies to mitigate production costs, offset volatile petrol prices and losses arising from costly intermediate imports, while also providing a basis for an improved differential for businesses faced with fluctuating selling price inflation.