LETTER: Can high interest rates lift growth?

Can economic growth be achieved in the midst of rising unemployment? That sounds like an oxymoron, right? The most common answer would be: most unlikely. 

Austrian-American economist Joseph Schumpeter introduced the concept of interest rates as a determinant of savings, which is an important factor in economic development. In SA people are always uneasy about rate hikes that are fuelled primarily by global inflation due to geopolitical tensions.

Are higher interest rates going to reduce the current domestic “spiralling inflation crisis”? I reckon most probably yes. It will mainly depend on how opportunities are used by decisionmakers in stimulating economic growth.

Economic growth can be achieved through a meticulous balance of creating a conducive economic environment for foreign direct investment to come in, growing of the middle-class and an integrated national social safety net system to keep the poor out of poverty.

This is the opportunity to drastically reduce the unemployment rate, especially of the youth, by using the current economic state of affairs to stimulate economic growth. Whether the raising of interest rates is part of the solution depends on who you talk to.

Simon Marobe 
MD, Poni Global Consulting

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