SAME INTEREST RATE FOR SACU COUNTRIES

MBABANE – SACU countries have the same interest rate of 3.75 per cent.

Between October and November, Southern Africa Customs Union (SACU) countries’ Monetary Policy Committees (MPCs) met individually to discuss rates but all came up with 3.75 per cent as interest rate. Eswatini is a member of SACU alongside Eswatini, Botswana, Lesotho, Namibia and South Africa.
According to SACU, maintaining price stability is essential for achieving economic growth and this is achieved through monitoring the inflation rate and maintaining a low and stable rate through the use of monetary policy instruments such as interest rate. SACU notes that central banks have a mandate to attain price stability together with other macroeconomic objectives, such as economic growth and high employment.

Minister of Commerce, Industry and Trade Manqoba Khumalo said,  “Interest rates speak to borrowing appetite for businesses and individuals.” With regard to the 3.75  per cent interest rates across the board for SACU, he said this has to be compared with other regions that may have different rates. “However, any downward revision of interest rates will attract, all things being equal, an increased number of borrowers and thereby have a positive a spin-off in economic activity in the SACU region, including investment and trade. This would work in our advantage,” Khumalo stated.

Sanele Sibiya, an economist, also gave his expert view on this. “Interest rates across SACU countries do not have an impact on cross-country comparison. But it is of interest in the pack of one-to-one currency countries, that is between South Africa, Lesotho and Eswatini,” he said. He explained that what it meant was that there was no incentive for people who bought investable assests from those countries to Eswatini.

Availability

Investments are driven by other factors like availabilty of instruments to invest in. In terms of attracting foreign money in treasury bonds, Sibiya said  there would be no incentive for that float across countries. “However, this gives the possibility of banks to loan out  more money, but with the current situation there is skepticism for banks to loan out money. Uncertainty in the economy makes banks to hold on to money,” he added. The economist predicted capital flight if there was no proper economic strategy and he advocated for a clear strategy in dealing with the current economic crisis.

He stated, “A more decisive strategy in the country that we can look forward to 20 months later would be ideal but seemingly we don’t have one.” This, he said, if not managed would lead to capital flight; where people will decide to take their money elsewhere, in a bid to protect their investments. To help the economy strive during this pandemic, he said, government should be investing in infrastructure to enable more employees to work from home. He suggested that instead of auctioning additional bandwidth, government should give this for free to companies; to enable smooth working online like South Africa did.

With the emergence of the fourth wave, it is becoming more apparent that all countries should have a plan and economies should be well prepared. Sibiya said, “Interest rate doesn’t play much role at this point in time. But what is worrying is the inflation rate.” He explained that nothing was done to deserve this inflation but it was borrowed inflation rate. “Can we afford for interest rate to be this low?” asked Sibiya. He explained that, if  the inflation rate went up the interest rate was also expected to go up. Looking at other countries overseas, he said, they had started to increase interest rate. Hence, the CBE might also have to increase interest rates in the next quarter or so.

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