IFP PRESS STATEMENT BY: 
MR NAREND SINGH MP
IFP SPOKESPERSON ON FINANCE

12th June 2008

The Inkatha Freedom Party would like to congratulate Governor Tito Mboweni for heeding our call on Tuesday, not to raise the interest rate by 200 basis-points, but instead raising the repo rate by only 50 basis-points today - said Mr Narend Singh MP, the IFP's Finance Spokesperson.

But, today's interest rate is the 10th consecutive time the Reserve Bank has adjusted the interest rate since June 2006, leaving many South Africans in the lower and middle income groups struggling to put food on the table and a roof over their heads.

Mr Singh commented: "The Governor must take into consideration that inflation, as presently being experienced, is largely due to pressures from high global oil and food prices - factors which are totally outside the control of the South African Reserve Bank."

"Whilst the IFP believes in inflation targeting, the current 3-6% band is not appropriate if the current unstable economic environment is taken into consideration. We believe that government must review the 3-6% inflation band and adjust it upwards.

"Over the past few months, Governor Mboweni has been urging South Africans to curb their spending, save and pay off their debts. Consumer spending has cooled down, but now South Africans will have to tighten their belts even further."

Mr Singh added that Government should now seriously look at ways to assist struggling South Africans, such as scrapping fuel taxes and zero-rating basic food items.

"The IFP believes that it is time for our government to tackle the factors that contribute to the high fuel and food prices - factors that they are able to control.

"South African fuel is among the most heavily taxed in the world and if there is one lever that the government can use to soften the global effect of the oil price on local motorists it is to investigate whether some of the taxes cannot be scrapped or at least lowered.

"For more than a year now, food price inflation has outstripped headline inflation by a significant margin, leading to all food products becoming much more expensive and out of the reach of the public.

"The IFP has previously called on government to zero-rate more basic food items, including chicken, a very valuable source of protein, and we want to renew this call today. "The IFP therefore calls on government to look at the bigger picture - the latest interest rate hike will hit the poorest of the poor the hardest. The fact of the matter is that millions of poor people will definitely benefit from lowering the fuel tax and scrapping VAT on some basic food items. In these trying economic conditions - these small changes will go a long way preventing financial ruin for many," concluded Mr Singh.