Fitch, the ratings agencies and the financial domination of Africa
Following ten successive quarters of economic contraction, there will no doubt be a lot of hand-wringing over the future of the country and economy in light of the latest downgrade of Namibia’s credit rating by the international ratings agency, Fitch.
To try and calm the nerves, Finance Minister Schlettwein pointed out last week that after South Africa (with its BB++ rating from Fitch), Namibia still has the highest rating (BB) in sub-Saharan Africa, where no country enjoys a prime investment grade rating by this particular agency.
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.
Certainly, the investment analysts are not wrong in every respect, just as two people with wholly different views of the world who find themselves on a sinking ship can agree that the ship is sinking by the observable fact of the water rising on board, but they may yet come to wholly different conclusions as to the cause, the immediate priority and the course of action to take.
It appears to me that the ever-sinking credit ratings of sub-Saharan African countries are one of the principal means by which international banks have been able to impose “conditionalities” and demand 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 over the past three years in economic activity across all sectors and a drop in tax revenues — has been coming for a long time.
What we are seeing unfold 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, partly as the West and East attempt to stave off the crises internal to their economies.
They may seek to export the crisis to Africa in the form of extracting higher profits on investment and demanding lower standards of regulations with regard to environment, taxation and labour rights, as well as loosening controls on the export of capital back to the metropolitan centres (and of course in a number of secretive ways, to off-shore tax havens).
To blindly pursue this path would be a race to the bottom in which African nations try to outdo each other by who can go the furthest in undermining their own national interests in order to attract investors that are now largely free from taxation and regulation, while the masses must shoulder the burdens of austerity and suffer the pains of “fiscal tightening” at home.
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, who rated the worthless lucky packets sold by investment banks as AAA prime investment grade, but which later turned out to be mere empty boxes of “collateralised debt obligations”, billions of dollars worth of which were sold to pension funds, to municipalities, to universities etc., but which ultimately contained little or 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 gambling houses, sophisticated fraud and money-laundering operations — evidently rotten to the core.
It is to the rapacious interests of these lenders that the ratings agencies speak when they gleefully downgrade the credit ratings of poorer nations, despite the fact that leading nations such as the UK and US have trade deficits and debt levels that far outrun their total domestic product (GDP).
Therefore, the advice of the IMF last month for Namibia to implement further austerity (structural adjustment) measures by further tightening public spending, and the near-simultaneous move by Fitch to downgrade the creditworthiness of Namibia are not based purely on some objective science, but on the calculated and vested interests of the big lenders, who still hold the moneybags and indeed the world to ransom. They demand ever greater cuts in public spending to maintain the unending repayment of the debt and the interest thereon.
Who created all this national debt? That is of course not something we can blame our critics abroad for, given that Namibia started out with so much promise and near zero external debt in 1990. The government must be held to account for every cent it has borrowed in the name of the people and shouldn’t be allowed to mortgage off the labour of current and future generations who had no say in making the debt that they will have to pay.
Ultimately, the real cost of the austerity measures 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. Its impact can be felt in the falling life expectancy of the general population as anemic health and public services collapse.
We should take heed of the warnings of the western financiers and their agents, like Fitch, because they have the capacity to hurt small nations and impose even greater hardships, but we should not be so foolish as to believe that the “cure-all” potion 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 agencies fear most, by taking a definite stake in the great wealth of natural resources mined here, in this supposedly “poor country”.
Direct ownership of the gold produced in Namibia would, for example, secure enough income to the State to pay its external and internal 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. I suspect they might even further downgrade our credit ratings for contemplating the very idea.