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'Repo rate cuts not enough, SA needs to implement structural reforms urgently'

23 July 2020 6:51 PM
Tags:
SA Economy
South African Reserve Bank
Repo rate
Standard Bank
Lungisa Fuzile
Lesetja Kganyago
Bruce Whitfield
Rand Merchant Bank
interest rate cut
structural reforms
COVID-19
Mpho Tsebe

Representatives of two banks comment on the SARB's widely anticipated announcement of a 25 basis point cut in the repo rate.

South African Reserve Bank (SARB) governor Lesetja Kganyago announced a widely anticipated 25 basis point cut in the repo rate on Thursday afternoon, to a historically low 3.5%.

RELATED: SA Reserve Bank cuts repo rate to 3.5% - an all-time low

Bruce Whitfield gets a response from Rand Merchant Bank economist Mpho Tsebe and Standard Bank CEO Lungisa Fuzile.

Both emphasize the urgent need for government to implement structural reforms if the country is to fight its way out of the current financial crisis.

If we look at the growth and inflation outlook.... I think we could probably still see just one more 25 basis point cut and thereafter we have to rely on other stimulus and there isn't much in the form of a fiscal policy that can be done.

Mpho Tsebe, Economist - Rand Merchant Bank

This then makes the structural reforms even more urgent and hence the governor reiterated that monetary policy is not going to be enough and that we need to see the structural reforms to lift growth.

Mpho Tsebe, Economist - Rand Merchant Bank

Fuzile describes the state of South Africa's economy as "terrible" due to a multiplicity of factors, including the fact that the country was in recession even prior to the Covid-19 pandemic.

So, what is the remedy?

I tend to prefer thinking positively and asking the question what is to be done to get out of where we are.

Lungisa Fuzile, CEO - Standard Bank SA

Policy certainty is paramount... Even those who were doubting before the pandemic will come to terms with the fact that we need to act and to act urgently... We need to work in ways that complement one another - government, the public sector broadly defined, the private sector, labour, the broader community, so that we can do what is necessary quickly, to get this economy back on its feet.

Lungisa Fuzile, CEO - Standard Bank SA

If we don't do that, we are facing a catastrophe.

Lungisa Fuzile, CEO - Standard Bank SA

The structural reforms that are contained in Minister [Tito] Mboweni's document published last year - we just have to start implementing some of those, at least the ones that are very clear-cut where there is absolute agreement...

Lungisa Fuzile, CEO - Standard Bank SA

Listen to the enlightening discussion in the audio below:


23 July 2020 6:51 PM
Tags:
SA Economy
South African Reserve Bank
Repo rate
Standard Bank
Lungisa Fuzile
Lesetja Kganyago
Bruce Whitfield
Rand Merchant Bank
interest rate cut
structural reforms
COVID-19
Mpho Tsebe

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