Ratings agencies and the financial control of Africa
THERE will no doubt be a lot of hand-wringing over the future of the economy in light of the latest downgrade of Namibia’s credit rating by the international ratings agency, Fitch. To calm the nerves, the Finance Minister pointed out that after South Africa (BB++), Namibia still has the highest credit rating (BB) in sub-Saharan Africa, where no country has a prime investment grade rating.
It is important to note that ratings agencies, like Fitch and Moody’s, are not infallible. They do not have access to some divine source of truth and objectivity. On the contrary they represent the vested interests of lenders, who have a definite stake in increasing the rate of interest on debt repayments from African countries.
The ever-sinking credit rating of sub-Saharan African countries is one of the principal means by which international banks have been able to impose “conditionalities” and higher returns on loans.
It is important to remember that the deepening economic recession in Namibia – as manifested in rising unemployment, wage stagnation and price inflation, as well as a marked slowdown in economic activity across all sectors and a drop in tax revenues – has been coming for a long time and is in a sense the slow-motion avalanche and belated impact of the global economic recession of 2008, which is only now (a decade later) making itself felt here on the periphery of the world economy.
The global recession and the near-collapse of the Anglo-American banking system was in large part brought on by the insatiable greed of the bankers and the open collusion of ratings agencies, such as Fitch, who rated the worthless lucky packets sold by investment banks as prime investment grade, but which later turned out to be empty boxes of “collateralised debt obligations”, billions of which were sold to pension funds, to municipalities, to universities, but which ultimately contained nothing of value.
When Lehman Brothers collapsed, the British and American governments had to pump hundreds of billions of taxpayer dollars into the banking system to prop up those banks that had in effect become sophisticated fraud and money-laundering operations, and were evidently rotten to their core.
It is to the interests of these lenders that the ratings agencies speak when they gleefully downgrade the credit ratings of indebted nations, despite the fact that leading nations such as the UK and US have trade deficits and debt levels that run rings around their total domestic product (GDP).
Therefore, the advice of the IMF for Namibia to implement further austerity (structural adjustment) measures, to further tighten public spending, and the near-simultaneous move by Fitch to downgrade the creditworthiness of Namibia are not based on objective science, but on the calculated vested interests of the big lenders, who still hold the moneybags and world to ransom to demand ever greater cuts in public spending to maintain the unending repayment of our debt and the interest thereon.
Who created all this debt? That is of course not something we can blame our critics abroad for, given that Namibia started out with so much promise and zero external debt in 1990.
Ultimately, the real cost of the austerity measures now demanded by the western financiers can be counted in the many lives lost and ruined in Africa for lack of healthcare, basic services and welfare. We should take heed of the warnings of the western financiers and their agents like Fitch, because they have the capacity to hurt nations and impose even greater hardships, but we should not be so foolish as to believe that the toxic medicine of austerity that caused us so much pain will also be the remedy.
We may be left with no choice but look to bold policy solutions to cut through the knot of dependency on foreign lenders and – if need be – do what the investors and their lackeys fear most by taking a definite stake in the natural resources mined here. Direct ownership of the gold produced in Namibia would, for example, secure enough income to pay our external debts, expand industry and agriculture, and raise the quality of life across the board. But the ratings agencies surely don’t want to hear that.