Credit rating agencies have warned the South African government that the country’s international debt rating is on the verge of being downgraded to junk status. The state and big businesses that heavily rely on borrowing from global financial markets, are obviously worried about how this might ruin their vulnerable financial positions.

If the country’s debt rating plunges to junk status, then the cost of foreign debt will increase, bankruptcy filings will skyrocket and the chances of defaulting on repayments of outstanding debt will also rise. Despite their National Development Plan (NDP) and massive infrastructure bailout package, the knock-on damages on an economy which totters between recession and virtual stagnation, will be acute and far-reaching. What must be added to this devastation are the heavy costs for society in terms of widening inequalities and steep falls in living standards.

Commentators demand that the ANC government must do more to avert the country’s foreign debt from being relegated to ‘sub-investment grade’ or ‘junk’. Government’s response to these complaints confirms, once again, how the state in a capitalist country safeguards the class interests of the capitalists. On the question of state debt in general, President Jacob Zuma and his finance minister tirelessly promote the interests of finance capital at the expense of the labouring and impoverished majority. For example, it is no secret that paying the yearly interest on state debt consumes a larger slice of South Africa’s public budget than the total amount paid in paltry social grants. Yet this accounts for just a tiny fraction of government’s welfare handouts to the capitalist class as it does not include the extensive tax breaks and subsidies for the enrichment of these profiteers. While cuts have been imposed on spending public money to satisfy the needs of the poor majority, whether such cuts assume overt or covert forms, it is legal for finance capitalists to defraud the public purse.

There is a sore lack of any rational explanations by Government officials as to how the country got stuck in a debt trap and why the post-1994 government must repay the unpaid loans of the apartheid regime. Instead, they are kowtowing to the dictates of international credit rating agencies and reinforcing their imperial image in the profit-driven credit system. Whether this is intentional or not, it fosters the false impression that South Africa’s future rests in the hands of a few rating agencies rather than the aspirations, revolutionary resolve and organised strength of the labouring majority.

Determining whether a big debtor (like a third world state or multinational corporation) has the capacity to repay a loan plus the interest on it, has grown into a multi-billion dollar industry for a handful of credit rating agencies based in America. On the surface, the activities of these agencies appear harmless.  If a finance capitalist plans to buy a government bond, then it uses the credit rating of the bond to indicate whether it would be a profitable investment. A loan classified as low quality, such as the typical junk bond, is relatively cheap but the interest on the bond comes at a huge premium (‘super profit’) for the creditor. This credit ratings business has proliferated in tandem with the expansion of large loan deals, which in turn, fuel rampant speculation in government bonds.

It is a highly concentrated industry in which three private corporations – Standard & Poor’s, Fitch and Moody’s – control more than 90% of credit ratings for government bonds on a world scale. The reliability of the secretive techniques they use to forecast whether debtors can repay their debt has been called into question. Instead of predicting and forestalling debt defaults, their credit rating models have been used to protect business secrets and encourage betting on debt that inflate “credit bubbles” (reckless and excessive lending to doubtful debtors, speculation and so forth) that ultimately crash in financial and economic disasters. The implosion of the American home-loan bubble in 2007, the recent debt crises in Greece, Portugal, Ireland, Spain, etc., gained impetus from the shady operations of this credit rating oligopoly. In case after case, they have aided in loading the cost of every debt crisis on the impoverished masses in these countries.

What is clear is that the machinations of rating agencies stretch far beyond just assessing the financial health of borrowers and their ability to repay a loan. Like the IMF and World Bank, they impose debt repayment strictures on third world countries that siphon the wealth of poor countries into the pockets of finance capital. They are swindlers that enforce austerity and help creditors in plundering the national budgets of third world countries. Given their notoriety, is it possible to draw a line between the shenanigans of credit rating agencies and high-order corruption? Clearing the rating agencies of corruption is the futile activity of bourgeois lawyers and the so-called rating agency reform movement. Such reformism is the direct opposite of principled anti-capitalist politics!

Protests against rating agencies are but a facet in the battle to overthrow a credit system for profit accumulation. Such protests must be indivisible from our struggle against capitalism in its totality. Working people should fight for a new financial system under their democratic control, serving their needs and for a higher quality of life.