The Congress of South African Trade Unions (Cosatu) on Tuesday expressed shock over new vehicle sales for July, which were down 27.6 percent from a year ago, an even steeper drop than a fall of 23.7 percent the month before.

The congress called for a prompt 200 basis-point drop in the repo rate.

Cosatu pointed out that sales had declined every month since April 2007, citing statistics from the National Association of Automobile Manufacturers of South Africa (Naamsa).

"Even worse is the news that vehicle exports fell by a massive 60.3 percent over the year to July. "This is further proof that we are still deep into a recession. The economy contracted by 6.4 percent in the first quarter, the biggest drop in almost 25 years, while employment fell by 267 000 in the same period, and the level of unemployment is still rising," it said.

The union confederation said that many of the job losses are in the auto industry, as declining incomes, in South Africa and around the world, are leading to a dramatic drop in the number of people buying new cars, and retrenched workers are paying the biggest price for this.

"These statistics strengthen the already strong case for the expansionist policies to save and create jobs contained in the Framework Agreement as South Africa's response to the global economic crisis, which government, business and labour hammered out, and is now in the process of being implemented," Cosatu said.

The group added that there was now an overwhelming case for a change in interest rate policy by the Reserve Bank, which left its repo rate unchanged at 7.5 percent in June.

"The deepening recession, combined with falling inflation, make the obsession with inflation-targeting even more irrelevant. More than ever the policy must target economic growth and job creation, rather than just inflation," Cosatu said.

It alerted to a Naamsa statement that said: "Improvement in the automotive industry's domestic operating environment would depend on a revival in consumer spending on the back of lower interest rates as well as on stimulatory government expenditure.

"So Tito Mboweni, in his final announcement as Sarb Governor before he says goodbye, could do the nation a huge favour by announcing a 200 basis-point drop in the repo rate.

"That would do much both to relieve the burden on consumers and to give the auto and other manufacturing industries the shot in the arm they desperately need to reverse the decline in sales and save jobs," Cosatu concluded.


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