Let’s hope our belts can fit in a few extra holes
When Reserve Bank governor Lesetja Kganyago announced the interest rate would go up on Thursday, it was simply an affirmation that things were going to get worse before they could get better.
Since the last quarter of 2015, the rand lost significant ground, wiping out any benefit from dropping oil prices, while the global market for just about everything kept slumping.
While Thursday’s hike will be felt immediately by those with mortgages and other debt burdens, the bitter medicine will not contain the disease of inflation anytime soon.
Inflation is projected to peak at 7.8%, but that understates the food inflation exacerbating the divide between the poor and middle class.
The price of maize is rocketing because of the drought, which has affected farmers countrywide – and those expensive mealies will find their way only to the few plates that can afford them.
The decision was the first of many that will keep jarring us into a new normal dictated by global events. The rand, along with the currencies of much of the developing world, was going to hurt no matter what, but political decisions – taken for no discernable legitimate reason – have made things worse.
“Central bankers are rational beings,” Kganyago told reporters this week. Ask the president about the Nene affair, he added.
Finance Minister Pravin Gordhan is expected to announce that there has been significant tax collection, some experts from Deloitte tell us. Income tax is expected to rise again, nonetheless.
With inflation expected to rise inexorably throughout the year, another austerity budget is the last thing we need.
But with growth expected to be practically nothing, it is probably the only thing we can expect.
Now let’s talk about those nuclear reactors.