THE IMPACT OF THE CREDIT DOWNGRADE BY RATING AGENCIES FOR THE POOR BY SINETHEMBA SOLDATI

The downgrade of South Africa’s sovereignty credit rating or credit worthiness to junk status by rating agencies such as Standard and Poor’s is a big blow for our country’s fragile economy, especially for the poor and the downtrodden. In addition, this has come at the backdrop of the announcement that our country’s economy has not performed well in two consecutive quarters, which has led the country to recession. The impact of these announcements is rife and will have a negative impact on interest rates, inflation rates and economic well-being in general.

Governments throughout the world finance their spending from two sources of funds; that is, taxes and borrowing (loans). Taxes can be generated through ordinary citizens and businesses, whilst borrowing can be done through financial institutions such as the International Monetary Fund(IMF), the World Bank and other multinational banks such as BRICS. 

In a country like South Africa where the tax base has dwindled due to high unemployment rate amongst other things, the government is often faced with budget deficit which leaves them with no choice, but to borrow money to service some of its debts and spending from the financial institutions mentioned above. 

Now how does the credit downgrade or junk status affect the poor South Africans? 

The rating agencies’ role is to determine the probability whether a country will be able to service its debt or payback the borrowed money to the lender. After considering all the necessary data, a country can be said to be either low/high risk in terms of borrowing. In our government’s case, rating agencies have projected our country as high risk.

This then translates to higher interest rates charged by financial institutions on our government. Furthermore, if the government spends more money on servicing a debt, it impacts its spending on capital, infrastructural projects and social grants to mention but a few examples.  The reserve banks also responds by charging a higher repo rate to commercial banks for borrowing and the commercial banks in turn charge higher interest rates to individuals who take out loans. The rand also loses its value and thus products and services become more expensive and unfordable for the poor.

In essence it becomes more expensive to take out mortgage bonds, buy properties, repay furniture debts, to buy food and other necessities. The value of the discretionary income gets reduced greatly thus economic wellbeing is affected.

However, there are many ways the government can mitigate or overcome this crisis:

Firstly, in a short run the government and the state must take a central role in stimulating economic growth by increasing its spending to increase aggregate demand and stimulate production. This will result in possibly more job opportunities, wage increase and spending.

Secondly, the government should immediately establish a sovereign wealth fund. profits and interests gained from this fund will be re invested into the country’s economy and it will mitigate excessive borrowing.  Thirdly, the government should engage in massive industrialization as this would result in improved production and Net Capital Outflow as well as Net Exports. Also, the government should improve its efforts on creating demand for local products.

WE MUST REJECT ONLINE LEARNING WITH THE CONTEMPT IT DESERVES BY SIYA NYULU

“One cannot shy away from the fact that amongst university students the white learner has more privileges at home than the black learner, therefore, even if we are provided with “free internet or free data”, this won’t have an impact on Internet access and use.”

28 MARCH 2020

Nothing is for free in a capitalist democracy. While universities are forcing students to study online and promising things like free internet and free or cheaper data, Google is making a fortune out of it. Surveillance capitalism is the new form of information capitalism, which aims to predict and modify human behavior as a means to produce revenue and market control. Data colonialism is a stage of capitalism which will flourish in the 4th Industrial Revolution as it’s the appropriation of human behavior and life through data. Basically its human social life all over the globe which has become a resource of extraction for capitalists. There is an increase in information society, where a number of people are relying on the internet in order to progress as consumers and as citizens, however, information society depends on one critical thing: Access. Access to computers and the internet is very important if one wants to integrate economically and socially in the information society. 

There can never be free internet as long as Google exists. Google has no boundaries and won’t be stopped by a virus to maximize profits, it strives on innovation and probably knows its client more than the client knows themself. Google, like surveillance capitalism, knows no privacy but makes income through people’s private life. There are many things that we might not share in public that we have searched for on Google. It’s no coincidence when you search something on Google only to see the same thing you searched being advertised on Facebook. Or how you can be having a conversation on Whatsapp about wanting to book a bus or flight only to get airline ads showing you different flight prices on your email. It’s creepy isn’t it? We are being watched through our phones and electronic devices by someone or a computer in the USA and China. 

Couldry and Mejias 2019 in Data Colonialism: Rethinking Big Data’s Relation to the Contemporary Subject, explain how firms use people’s everyday lives for the generation of profit through rendering it into quantifiable data. They argue “firms like Amazon, Apple, Facebook, and Google in the “West”, and Baidu, Alibaba, and Tencent in China, are its most well-known players. The social quantification sector includes both big and small hardware and software manufacturers, developers of social media platforms, and firms dedicated to data analysis and brokerage. The latter, a largely unregulated part of the economy, specialize in collecting information from medical, financial, criminal and other records for categorizing individuals through algorithmic means. Data brokers package and sell those lists to advertisers and other users such as government and law enforcement agencies”. 

Digital platforms are therefore used as business ventures, technologically capturing and appropriating social life. The main purpose of social media is to encourage people to share their thoughts and activities and this has turned to a form of commodification. 

The outbreak of the corona virus has ended the first term of school earlier than it should have, with students and staff expected to work from home. Institutions of higher learning are made to choose between suspending the academic calendar or resorting to online education. The challenge becomes how they (students and staff) are going to go about teaching and learning as many students and some tutors do not have access to computers, laptops, Wifi and money to buy data. This problem we find ourselves in has opened my eyes to the digital divide and inequalities we face as a country, which is regarded as a country that is an information integrated society due to the widespread ownership of cell-phones. This has also opened my eyes to the cruelty of institutions of higher learning as capitalist institutions which strive on profit maximization and exclusion. 

There is a growing demand for mobile devices as information is an essential economic resource most especially in developing countries. In our country the relationship between income and the internet is very important as a large number of people who have access to the internet and who use it frequently are the educated and the wealthy. Many people in rural areas do not have the infrastructure for uncapped Wifi, there’s no resources for close by internet cafés and it requires lots of money for them to have data. One cannot shy away from the fact that amongst university students the white learner has more privileges at home than the black learner, therefore, even if we are provided with “free internet or free data”, this won’t have an impact on Internet access and use. The deep divisions between populations are being revealed. Online education will benefit the few who have resources readily available such as smartphones and laptops, data and money.

The question then remains; what should be done? How should institutions of higher learning go about facing this challenge that they didn’t create and is out of their control. Nobody knows when and how all of this will end. We are all hoping and praying that we all come out healthy and alive and we all have been made to rethink what “normal” is. People are questioning whether or not the formal way of lectures is a better way or maybe some students need to practice self-learning. For some departments it’s impossible to learn online while for some departments it’s possible; however what is at stake here is the future of the black child. 

I am suggesting that the future of the black child is at stake because online learning will affect their academic performance as some students come from overcrowded households with no internet, no stable income, toxic families, and have made the university space a place to escape from that toxic place. They come from rural areas with little to no network. There are no close public libraries or internet cafes. It will affect the mental health of students because they have to cope with the strain that came with this pandemic, and on top of that academic stress. Whatever decision taken has to put the black and poor child at the center. Capitalism needs to stop denying black and poor students access to education.