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"IT'S the rich wot lives in clover/It’s the poor wot gets the blame.” So goes a line in an old - and often ribald - English music hall song. But it sums up exactly what continues to happen as the country awaits the full effects of junk status.
Those lines seemed particularly appropriate this week, with news of still more job losses in the first quarter of the year and perhaps more than 8 000 at AngloGold Ashanti. At the same time came the announced obscenity that top chief executives are now paid R69 000 a day - more than the majority of workers earn in a year.
READ: Why R69 000 a day for JSE Top 100 execs will destroy capitalism
As regards junk status, our freshly minted Finance Minister Malusi Gigaba continues to maintain it is largely meaningless and will have little real impact on the country and its citizens. Whether he will be able to sustain this in view of first-quarter unemployment figures - the highest for 13 years - remains to be seen.
But the minister either lied or was unaware of what this junk designation, within the context of the existing system, actually means. Because it will have and is starting to have adverse effects. We will feel them in coming months and the sufferers will, once again, be mainly working people, the poor and the poorest of the poor.
And they happen to be the overwhelming majority of South Africans.
The reason for this is simple: the pressure is starting to be felt at the level of government and business where loans have to be serviced and fresh credit sourced, both at increased cost. And, as they always do, government and business will pass on this pain to the consumers, the workers and the legions of unemployed who all pay into the fiscus, at the very least by means such as value-added tax.
At a basic level, what junk status from two of the three international ratings agencies (with a third possibly on its way) means is that it will cost more to borrow money. The downgrade will certainly push up the interest payable on the country’s already substantial debt. Even a 1% rate hike will raise South Africa’s current R150bn-plus annual interest payment, met by taxpayers, by more than R1.5bn a year.
The current economic system is like a casino
But it is also useless to complain about the ratings agencies. They are a reality in the casino that is the current economic system; a system that relies on well-heeled gamblers placing their bets on corporate and national entities around the world.
The role of the ratings agencies can be compared to that of horse racing tipsters, although the agencies operate in a more manipulated game than their counterparts who deal with the so-called sport of kings.
It is often pointed out, particularly within the labour movement, that these agencies that have such influence were the very bodies that commended - and so promoted - the sub-prime mortgage market a decade ago. They fuelled a mad merry-go-round of non-performing assets that quickly became toxic and, in 2008, triggered what is now an ongoing economic crisis.
So Gigaba is correct is implying that the likes of Fitch, Standard & Poor’s and Moody’s do not themselves represent anything real. They merely speculate about where the most lucrative investments exist and act as advisers for a tiny monied minority that seeks only to extract maximum profits.
But their word about areas labelled troublesome or junk means less investment in such areas. It also means, perhaps more importantly, that everyone within “junk” territories becomes subject to punitive interest rates for fear that borrowers might default on loans.
Our indebted government, its economic problems compounded by corruption and levels of incompetence that often help to facilitate larceny, is already reacting to the downgrades with greater austerity. And more posts will be frozen, more jobs lost or not created, and the inflation rate will almost certainly rise as the exchange rate falls and the ranks of the unemployed are swelled.
The greater pain doesn’t come overnight. It takes time. And, despite what Gigaba says, even more pain is on the way. So do not be surprised when workers and the poor not only refuse to accept the blame, but also decide to resist strongly any further pain.
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