Why was interest rates cut this month?

SARB 'not pressured to cut rates'

The decision to cut interest rates this month was not due to political pressure, Reserve Bank (SARB) governor Tito Mboweni said on Friday.

He said some people claimed that the SARB bowed to political pressure when it reduced the repo rate, at which it lends money to commercial banks, by 50 basis points to 7.5 percent on August 12.

"Our educated economists have complained that the SARB was unpredictable," Mboweni told Parliament's finance committee.

The rate cut came a day after members of the National Union of Mineworkers (NUM), the trade union Solidarity and senior officials of the Chamber of Mines had marched to the Bank's head office in Pretoria.

The protesters were demanding a cut in interest rates, the abolition of exchange controls and the purchase of dollars in the market.

"The central bank is independent, not only from government, but from the markets, from economic commentators, from the NUM, from Solidarity, from the Democratic Alliance.

"It is independent to pursue its objectives independently without fear or favour," Mboweni said in response to a question from one MP.

He said the NUM were not the only ones who have come to the Bank to complain about the exchange rates. "The only difference is that they did that publicly".

Anglo American, the Millennium Labour Council, the Chamber of Mines, Patrice Motsepe and Tokyo Sexwale are some those who complained about the currency.

"Every time I meet Patrice Motsepe or Tokyo Sexwale, they complain that the exchange rate of the rand might make their BEE (black economic empowerment) deals to be more difficult.

"I say, well, bad luck broer, face the real world," Mboweni said.

He said the NUM march was remarkable in that he was able to engage with the marchers despite their not having "come up to my office in a lift".

"They (the NUM) did absolutely nothing wrong. The timing might be bad, but they did absolutely nothing wrong.

"I mentioned to them that they come to visit us openly, everybody sees them marching through the streets of Pretoria to make their presentations."

Others "visit us driving expensive cars... and coming up to my office in a lift. Nobody sees them", he said.

Mboweni asked why some people wanted to "stop these ones who come marching when those who come in expensive cars you don't stop them".

He said he told members of the NUM during the march that the SARB had bought over $32-billion since 1999, and now had a positive balance of $12-billion.

Article by: Sapa - Posted Mon, 23 Aug 2004