By Andile Mngxitama
South Africa is being ruled by three credit rating agencies – Fitch, Standard and Poor’s (S&P) and Moody’s. Fitch, which is owned by one of America’s largest diversified media companies – Hearst, has its headquarters in both New York City and London while S&P and Moody’s are based in America. Their legislative seat is in the treasury and their Prime Minister is Pravin Gordhan. They rule in the interest of white monopoly capital (embodied by families such as the Oppenheimers and the Ruperts) and their London based imperialist financial entities. They have the media to sustain their ideological hegemony. We are back to the divine rights of kings all over again. They are elected by no one and accountable to no one. Their rule is sustained by lies and threats. Like during feudalism, the power of the king is ordained by God and the clergy provides the ideological justification for an inherently evil system that is projected as good and best. Our media and universities today play the same role as what the clergy did back then. All this of course falls flat in the face of evidence and a little bit of truth. We must remember it took Herculean struggles to end feudalism. It was men like Robespierre and the marauding Jacobins that brought enlightenment proper with a little help from the guillotine. In 1918, Vladimir Lenin also had to take to the same sacred guillotine to cleans Russia of the vestiges of the Tsar and his evil empire.
The South African constitution provides for elections every five years. The rating agencies hold their plebiscites every six months or as and when they feel like it. The South African parliament is helpless in the face of the power of these triple devils. The president of the country is a prisoner of the same agencies. The media and the opposition parties, who get their instructions from London, are the foot soldiers of the whole thing. When Gordhan, the Prime Minister of the rating agencies, gave the budget speech earlier in the year, the whole parliament stood up as one and gave him a standing ovation. They repeated the well rehearsed genuflection to London yet again when he presented his Medium Term Budget Speech which reinforced the neo-liberal austerity budget in service of white capital. It didn’t matter that on both occasions Gordhan had outlined a budget process that keeps the majority marginalised and prescribed the parceling out of state assets to white capital.
Gordhan’s mandate, just like all his predecessors, is to maintain the neo-colonial arrangement crafted in 1994 and given policy content in 1996 by the GEAR macro-economic framework under Thabo Mbeki, Trevor Manuel and Tito Mboweni. The terrible Ts! The terrible Ts policy framework was designed to be hypersensitive to white interests and was presented as rescuing the country.
Last December President Jacob Zuma attempted a liberation of the treasury by replacing one of the functionaries of the rating agencies, Nhlanhla Nene, with an outsider Des van Rooyen who may have been more susceptible to being brought under the influence of the democratic process as given expression by the Legislative Assembly in Cape Town.
The response of the ruling class was swift. We all know that within days the rand had lost historic proportions of its value and the Johannesburg Stock Exchange (JSE) had bled hundreds of billions. The fight back was total and brutal. By the time the representatives of white capital such as Rupert and Maria Ramos had meetings with the ANC top bras to issue ultimatums, it was clear that Zuma couldn’t sustain his attempted takeover of the treasury from white capital. He blinked. Gordhan was returned to the position of finance minister and the interests of white capital were restored.
It was a spectacular instance of state re-capture by white capital. Alarmed by what they had seen Zuma do, the rating agencies as the first wall of defense went into over drive. They must have been thinking, “Zuma and his silly ideas of bringing treasury under the influence of the popular majority will have to be totally subdued if not removed.” If up to last December white capital had question marks about Zuma, his appointment of Van Rooyen put the matter beyond doubt. Zuma had to go! Part of the strategy was to prop up the opposition parties and to strengthen the pro-London arm of the ANC led by Gordhan.
The threat of “junk status”
The rating agencies have maintained a rating just below the feared “junk status” for the country, just to keep Zuma in check. Some of the them have downgraded Eskom as a warning shot and also to weaken its board and leadership, more so Brian Molefe and Dr Baldwin Ngubane. The state broadcaster, the SABC, is on its knees and South African Airways (SAA) is on the verge of privatization after Gordhan returned Bain and Co to SAA – a firm credited for putting SAA in a permanent crisis after facilitating one of the largest stripping of assets we have seen, which is another way of saying “looting”.
The near junks status rating works to incentive Zuma away from treasury and Gordhan. In their assessments, these agencies are explicit about what they want to see happen and key amongst their considerations is the “independence” of treasury. This, of course, is a coded way of saying treasury must remain under the control of white capital.
The assessment of the rating agencies has little to do with economic performance but everything to do with politics. Under the current political climate they won’t risk a junk status even if the economic down turn actually calls for it. They know that such a rating would play in the hands of Zuma who would promptly remove Gordhan for lack of performance. It would seem that not going junk, but threatening it, is the best political position to take by the agencies. This impasse and lurking danger shall help maintain the political status quo until the political fortunes of the pro-London faction in ANC gains better traction.
An important date is December 2017 when the ANC holds its elective conference. Until then, many small but consistent attacks on Zuma and his perceived supporters shall be waged by the white capital created and sponsored “civil society organisations” and campaigns such as Save South Africa. The opposition parties shall continue with testing their strength with motions of no confidence.
The rumor mill has it that large sections of the ANC MPs are being tempted with bags full of money from Stellenbosch. Will they hold the line or will they go for the money? Add to this milieu the constant confidence pounding from the rating agencies. The plotters believe these combined measures may help to develop a momentum which leads to a possible tipping point so that they don’t have to go to the elective conference with Zuma as president of the country. There is consensus right now that Zuma has the backing of the majority of the ANC branches. If this does not change or of he is not recalled then his opponents are waiting for a decisive ruling at the elective conference.
The key point to remember is just how the rating agencies are playing a central political role in the life of the nation. We can say without fear of contradiction that these agencies are safeguarding the interests of their clients and a system that works for them. These rating agencies and the white ruling class on whose behalf they rule South Africa fear nothing more than a treasury which is under the sovereign control of the elected representatives of the people. So there is a state within the state here, or more correctly, treasury is the state. Gordhan is the non-elected prime minister of this real state. His primary mandate is to protect the interests of those who forced Zuma to appoint him and to maintain this arrangement the rating agencies are key.
A lie that has been swallowed by even some of the most bright minds in our nation is that the rating agencies are a necessity or even that they measure economic performances and conditions impartially. Many actually have come to believe that without rating agencies a country can’t function. That’s a little like saying lending of money can’t happen if there are no credit bureaus. This is obviously wrong because we all know of parallel lending systems that work perfectly well without overlords. The worst thing about these rating agencies is that they are not neutral evaluators, they are active political players in defense of local and global capitalists. They precipitate coups and regime changes.
BRICS vs the West
The battle between the West and BRICS today is fought around the rating agencies. The danger these agencies pose was first responded to by China with the establishment of its own rating agency, the Dagong in 1994. Yes I know dear reader, it may be the first time you hear about the Dagong Global Credit Rating co. but I do hope you know that China has been the best performing economy for the longest time and its credit rating is not dependent on the “big Three” rating agencies.
Since the formation of BRICS there has been talks of establishing a BRICS rating agency. Russia and Brazil, who are key BRICS countries, have already been hit with junk status ratings by the big three family. They hit Russia in January 2015, not because of its economic situation, but because of the political questions related to the Ukraine. At the time, Russia was not doing well economically because of the global slump in the price of oil – but surely one can’t downgrade a country due to external issues of commodity markets. Russia was downgraded despite the fact that it had one of the lowest ratios of debt to GDP, standing at only 19%. One must compare this to the USA debt to GDP ratio – which is up to 104.5%.
As expected Russia responded maximally. In December 2015 it announced its own rating agency the Analytical Credit Rating Agency (ACRA). Most interesting is how Russia turned around it’s forecast to positive after only 12 months. A forecast of growth confirmed even by the hostile pro-Western rating agencies.
There it is, the sky won’t fall if the triple devils leave!
The story of Brazil is ofcourse different. There, the rating agencies synchronized their assault on the economy in tandem with the opposition parties. When they had brought the economy down with the junk status and inflation running amok, they went for the kill. They got the USA sponsored “civil society organisations” to spread the narrative of the President as corrupt, they mobilized on the streets and then linked up the right-wing opposition parties whose leaders are amongst some of the most corrupt individuals in Brazil. They then laid siege of the parliament and corrupt members of parliament who could be bought and then used the legislature to effect a coup against a democratically elected president. This is the option being tested also for South Africa. The rating agencies brought Brazil to its knees and then the opposition parties finished it off. We shall never know why the Workers Party of Brazil didn’t follow the Putin method. In the same way we watch Zuma and his pro-BRICS faction looking on helplessly as the rating agencies raid our national sovereignty.
The false science of rating agencies
A lot of bright black people and commentators sighed a sigh of relief when one of the three agencies didn’t give us a junk status rating. They honestly believe we need the rating agencies and they think these agencies are honest scientific entities which knows what they are doing. Most people don’t know that in general it’s between five and eight people who do these country assessments upon which the agencies make decisions.
In South Africa, on average, one needs at least 50 000 votes to secure one seat in parliament (depending on voter turn out of course). The ruling party in SA was voted by some 11 million people. But less than ten foreigners have the power to determine the fate of a nation. This is fascism!
Time and again, the science of these rating agencies has been found to be bogus. What has been found to be true about them is that they are conflicted, corrupt and agents of coups and mayhem. A quick google search on these agencies reveals the extent of their hatred and distrust the world over. They are the hit men of imperialism. One of the monumental evidence of how bogus their science is, was their total failure to foresee the 1997 Asian Economic Crisis which had devastated the far East. These agencies had been projecting positive sustained economic development for the region, then the bubble burst!
The other big event on the catalogue of failed assessments is the Enron scandal. The literature shows that up to four days before Enron was declared bankrupt the agencies had given it the highest rating available. The results were devastating. “What happened?” many asked. Then it was the recent Subprime mortgage blood bath in the USA, where thousands of people lost money and homes and this precipitated a massive financial crisis. Many people had been investing in securities linked to mortgages which had been given the highest rating by these bogus science rating agencies. In no time the highly rated securities were revealed to be rotten eggs. Real people got hurt for real. The rating agencies who lied to the people paid no compensation or any form of punishment was meted at them. They took their profits and it was business as usual.
Like a phoenix, they raise from one scandal to the next with their integrity intact.
The example I like the most is when in 2011 the rating agencies decided to play big with the USA and lowered its ratings. The reaction is not the Armageddon we are told to avoid at all costs including surrendering the country to a bunch of greedy foreigners. Instead of the cost of borrowing going up, the USA found itself borrowing at even more favorable terms after the rating agencies downgraded it.
And you think these people are involved in science? No they are doing political science, we all know it’s all bollocks!
Any country, more so that which emerges from settler colonialism like South Africa, shall never know economic freedom so long as its political and economic life is dictated to by the rating agencies. We in South Africa must face up to the truth that we are ruled by these rating agencies, that treasury is their parliament and Gordhan their Prime Minister. This renders any claims of people’s participation in electing parliament a cruel joke. Our national assembly is impotent. The president is equally neutralized. The sad thing is that these representatives of the people in the National Assembly have decided to play second fiddle to treasury and thereby de facto come under the sphere of influence of Gordhan and by extension the rating agencies.
President Zuma’s attempts to liberate treasury have to date been successfully rebuffed by white capital. The interesting question to pose is the following, will Zuma wait with folded arms for the rating agencies and their agents to finish him off like they did in Brazil or shall he fight back?
Let’s watch the space!