Insights of rating agencies and thinking on the ground

This article first appeared on Creamer Media’s website: polity.org.za

When Cyril Ramaphosa became State President, he inherited leadership in a state with a massive debt. Indebtedness hovers everywhere and seeps into the running of the state, state-owned entities, the prices of essential goods we buy or taxi fares transporting people to work and in many other ways. South Africa has returned to junk status that it had inherited from the apartheid regime but from which it managed to surface, in the early years of democracy.

Just before leaving office former president Jacob Zuma increased this debt by promising free higher-level education. Even though the call by Zuma, about which he had done nothing in his terms in office, was populist, insofar as it did not consider the education system as a whole and how costs would be met, it inadvertently raised important questions.

How do we relate the need to pursue fiscal prudence with defining for what objectives the monies are being safeguarded? It is true that at this point in time much of what may be safeguarded is being used to pay off this or that debt or to achieve stability in one or other entity in order to prevent its collapse or show it to be a viable concern and hopefully attract investors.

This effort to attract investment and ward off further downgrades is in a world where an economy like ours is especially vulnerable. In the pre-globalisation era it was generally possible for states to simply pursue pro-poor policies within their own domain, as states, without clear and fairly quick responses in terms of capital withdrawal.

The globalised world has meant that if investors believe they will get a better return on their investment elsewhere or if they believe that policies pursued are too pro-poor and insufficiently pro-capital, they can simply take their money elsewhere. Big capital is generally opposed to social spending and the balance of power is now heavily weighted in favour of capital and against welfarist policies that could at an earlier stage be pursued within sovereign states without consequences determined by other states. Much as South Africa needs capital, it needs equally to maintain its independence while garnering whatever investment it can.

In this situation of urgency, to keep South Africa afloat, there is a tendency to watch with bated breath as ratings agencies visit South Africa or to follow every pronouncement of persons connected with these agencies or to read interpretations of “market sentiment” and how the market will “react badly” or well to this or that.

While this reading of the signs of the times, as understood by markets is ongoing, there is simultaneously a critical social situation in the country with signs of unrest all over, under ANC and also DA rule. On 13 July News 24 reported that there was “a scourge” of protests that kept South African police officers busy in three provinces – the Northern Cape, Western Cape and Gauteng. Interesting that the word “scourge” is defined by Chambers Concise Dictionary as a “cause of great suffering and affliction” and cancer is given as an example of the meaning of a scourge. In other words, the media report stigmatises the protests as akin to something cancerous. The poverty, lack of facilities to meet basic needs, homelessness, landlessness, unemployment, lack of water and electricity or adequate health care that has led to the protests are not spoken of in similar terms.

I point to this language, (used in a website that I use all the time), that is attuned to what some may see as “market sentiment”, which is averse to popular demonstrations that obviously disrupt a range of activities necessary for production or other economic activities.

This perhaps subliminal adoption of “market speak” points to the need for us to examine the balance between the power of ratings agencies and the power of the people on the ground. I am fully behind the defence of the treasury and attempts to curtail debt and ensure that there is no profligate spending or corruption or state capture. This is all part of stabilising the economy. But we cannot absolutise defence of the treasury, as if it is all that matters in this world of ours.

It is a good, a very vital good that must be respected but, in our context. Yet we need, also, to ensure that we do not allow ratings agencies to displace or imprison our vision, determine what are desirable goals to which we aspire and what are bad things, necessary to avoid, as “scourges”.

Even though we now need all the investment we can get and all the support we can garner from ratings agencies, we need to always remember why this is required. It is not simply to ward off debt, even though that is urgent at this time. In the long run we need to have money in the fiscus for social spending in a society that is the most unequal one on earth. That cannot be forgotten or underplayed.

When we concern ourselves with “signals” we send, it is important to balance what the ratings agencies and the markets may think with the signal that is sent to those who are unhappy, that almost 25 years after the inauguration of democratic rule they are still not seeing much improvement in their lot.

When the Zulu King Goodwill Zwelithini made various threats, what signal did President Cyril Ramaphosa send to various sectors, when he is reported to have acted as follows?:

“President Cyril Ramaphosa cancelled his community meeting in Chatsworth to meet with King Zwelithini on Friday night.

“The meeting is understood to be part of the ANC's ‘damage control’ following veiled threats of secession and violence made by the Zulu king during a special imbizohe held in Ulundi this week.

“Ramaphosa assured the king that government would not touch land under the trust.

“'I had a wonderful meeting with King Zwelithini. He and I have a wonderful relationship and when the issue of the Ingonyama Trust came up, I felt the need for meeting’, Ramaphosa said.

“'I assured him that (neither) government nor the ANC has any intention whatsoever to take the land from the Ingonyama Trust. I reaffirmed that land under control of the trust as per legislation and at the end it is the land he has custody of on behalf of people,’Ramaphosa said.”