Lenders expect to be compensated for inflation and inflation risk. In turn, the share of current income that we need to spend on servicing debt increases, draining resources from other priorities, like investment. So it is clear that we need to focus on doing things that reduce the general level of lending rates instead of permanently raising them.
As I have discussed today, the markets for goods and services in South Africa are commonly dominated by a few big firms. And labour markets are uncompetitive because of skills shortages, restricted entry, and extended industry or sectoral determinations. The result is that prices and wages are only flexible in an upward direction, and are otherwise rigid.