‘Business to feel pinch as interest rate rises again’
The latest interest rate hike of 50 basis points has not gone down well with businesspeople, who say it is going to destroy businesses and jobs.
The South African Chamber of Commerce and Industry chief executive Alan Mukoki said the Reserve Bank’s decision to raise the cost of credit would result in people having less disposable income and many are no longer going to be able to afford to buy houses and cars and bare necessities.
“A lot of people who would have qualified for home loans are no longer going to. If there is a big decrease in the number of people who are not buying houses, this means that companies that sell building materials like bricks and cement are going to suffer.
“When people have less cash to spend they are going to demand that their employers increase their salaries, and this will increase labour costs for business at a time when consumer demand is low,” said Mukoki.
A prominent entrepreneur who runs shopping centres and other types of businesses across the country, said the rising interest rates were affecting his businesses as well hitting his tenants hard. He did not want to be identified for commercial reasons.
“The interest rate hikes have been affecting my bonds, because for us to do [property] development, we borrow money from the banks,” said the entrepreneur.
“The foot count that comes to my malls is no longer as high as before the time when the interest rates started going up.
“Anyway, I am trying to be okay, I am soldiering on under difficult circumstances. These interest rate hikes are even difficult on those who have made it in life. Life is such that when you borrow in hundreds you suffer in hundreds. When you borrow in billions you suffer in billions. There is no way you can run from the interest rate hikes,” he said.
The entrepreneur added that the ANC should consider implementing its 2017 Nasrec national conference resolution of nationalising the Reserve Bank.
“The problem is that the Reserve Bank is trying to fight inflation by raising interest rates. You can’t do that. It’s like we are following the trend of the Americans and Europeans who are in an interest rate raising cycle.
The entrepreneur said the country should instead focus on infrastructure development projects and creating jobs.
“If we do these things, more people would be working and be able to spend money, unlike now. Both the inflation and interest rates are going up but people are not spending because they don’t have money to buy.
“How are we going to grow the economy by raising the interest rates? How are people going to start companies when credit is very expensive? And how are we going to create jobs? Currently the interest rates are way too high,” he said.
He said the bigger retailers, which are multinationals, continued to thrive under the rate rising cycle but the emerging retailers, run by small entrepreneurs coming from the black communities, were being negatively affected by the hikes.
“Remember that small entrepreneurs don’t have resources and reserves, while multinationals have reserves and resources, and are able to move their stock around [to shops across the country where the market demand is high]. Multinationals also have a bigger pool customers compared with the small entrepreneurs,” he said.