The four intersecting risks that may hit the global economy

Risks Facing the Global Economy

Several things that have nothing to do with one another on their surface — a dysfunctional U.S. House of Representatives, tumbling bond prices, war in the Middle East, and tensions with China — are creating an intertwined set of risks for the global economy.

1. Political Dysfunction in the U.S.: The U.S. House of Representatives has been without a speaker for three weeks, impacting its functionality. Deep divisions within the Republican majority are at the heart of this issue.
2. U.S. Financial Concerns: The U.S. government might run out of funds by Nov. 17. Additionally, there's a request for $106 billion for assistance to Israel and Ukraine that awaits House approval. Rising concerns about this fiscal scenario have led to increased borrowing costs for the U.S.
3. Geopolitical Tensions: Recent events, including conflicts in the Middle East and increasing tensions with China, have heightened geopolitical risks. These tensions have the potential to impact global economic activity, as highlighted by Fed chair Jerome Powell.
4. Economic Struggles in China: China is grappling with sluggish growth and significant private-sector debt. There's also an escalation in export control disputes with the U.S.

These combined factors have contributed to recent stock market fluctuations. While the U.S. economy remains resilient for now, the interplay of these risks can lead to unexpected outcomes for the global economic outlook in 2024.

Read more: https://www.axios.com/2023/10/25/israel-hamas-war-dc-risks

Global equity funds saw significant outflows last week, driven by concerns about rising U.S. bond yields and the ongoing war in the Middle East.

Global equity funds saw significant outflows last week, as investors became more cautious about risk assets amid rising interest rates and geopolitical uncertainty.

Key takeaways:

• Investors pulled $7.46 billion out of global equity funds in the week to Oct. 25, the sixth consecutive week of outflows.
• European equity funds saw the largest outflows of any region, at $7.39 billion, followed by U.S. equity funds at $2.69 billion.
• Health care, financials, and consumer discretionary funds saw the largest outflows by sector. Technology and energy funds were the only sectors to see inflows.
• Safe-haven government bond funds and money market funds saw inflows, as investors sought refuge from riskier assets.

Implications:

• The outflows from global equity funds suggest that investors are becoming more cautious about risk assets as interest rates rise and geopolitical uncertainty increases.
• The inflows into safe-haven government bond funds and money market funds suggest that investors are seeking refuge from riskier assets.
• The outflows from high-yield bond funds suggest that investors are becoming more concerned about the creditworthiness of riskier borrowers.

Investors are becoming more cautious about risk assets. This could have implications for fintech companies that are focused on riskier asset classes, such as cryptocurrencies and peer-to-peer lending.

Read more: https://www.reuters.com/markets/us/global-markets-flows-graphic-2023-10-27/

Kenya to become visa-free to African visitors.

Kenya will end visa requirements for all African visitors by the end of 2023. This is a move towards visa-free travel within the continent, which has been a goal of the African Union for the past decade.

President Ruto said that visa restrictions are bad for business and that African citizens should not be locked in borders.

Only three African countries currently offer entry to all African citizens without a visa. Kenya is ranked 31st out of 54 states on the Africa's Visa Openness Index.

The AU launched its African passport in 2016, but it is still not widely available. This is partly due to concerns about security, smuggling, and the impact on local employment markets.

The Visa Openness Index report recommends a number of measures to make it easier for Africans to travel within the continent, such as lowering fees, making visa-on-arrival standard for African visitors, and implementing a secure e-visa system.

Implications:

• The end of visa requirements for African visitors to Kenya is a positive development for businesses and entrepreneurs across the continent.
• It is also a step towards achieving visa-free travel within Africa, which would boost trade and investment.
• Other African countries should consider following Kenya's lead and making it easier for Africans to travel within the continent.

Read more: https://www.bbc.com/news/world-africa-67254349

AI and the reboot of Scottish finance

Scotland is setting out to become a global center for artificial intelligence (AI) in finance and energy. The new strategy will focus on strengths, including asset management and payments technology, and on financing the energy transition.

There are threats and opportunities to AI. Threats include misinformation, fraud, scams, the derailing of democracy, and terrorist deployment of chemical weapons. Opportunities include drug discovery, automation of dull and repetitive tasks, and new business models.

Scotland is facing competition from other emerging economies, such as Rwanda, which has a fast-growing financial center.

Scottish Financial Enterprise is looking to America for inspiration, noting the growth of asset management in Boston and payments technology in Atlanta.

Read more: https://www.reuters.com/markets/us/global-markets-flows-graphic-2023-10-27/

FIVE MSME LENDING PRODUCTS COMPLETE TEST PHASE UNDER RBI'S REGULATORY SANDBOX SCHEME

The Regulatory Sandbox by RBI allows for live testing of novel products/services in a monitored setting. Here, the RBI may permit some regulatory relaxations exclusively for testing.

• Key Announcement: Five MSME lending products have successfully finished their testing in the RBI's regulatory sandbox. Companies that completed this phase are: FinAGG Technologies Private Limited, Mynd Solutions Private Limited, Rupifi Technology Solutions Private Limited, Small Industries Development Bank of India and SysArc Infomatix Private Limited.
• Next Steps: Regulated entities can now consider adopting these tested products.
• Upcoming Cohort: RBI has also introduced the fifth cohort under this scheme. Those with innovative offerings across various functions in RBI's purview can apply between October 30 and November 30, 2023.
• Historical Data: Applications were invited for the first cohort in November 2019 and for the second with a theme of 'Cross Border Payments' in December 2020.

Read more: https://auto.economictimes.indiatimes.com/news/industry/five-msme-lending-products-complete-test-phase-under-rbis-regulatory-sandbox-scheme/104778886

Google Wallet is making it easier to use tap to pay for transit passes

Google Wallet is making it easier for commuters to manage their commute by:

• Displaying ride history and savings
• Keeping users informed about service alterations and promotional fares
• Making it easier to buy and store transit passes directly on the phone
• Expanding ticketing options within Google Maps to allow commuters to plan multi-leg journeys and purchase all necessary tickets in one go

These new features are being developed in partnership with over 250 ticketing entities globally and will make it easier and more convenient for commuters to get around.

Read more: https://www.androidpolice.com/google-wallet-tap-to-pay-transit-passes/

A clash between Nigerian banks and neobanks highlights financial industry’s complicated fraud problems

Situation Overview: Fraud risks are escalating in Nigeria’s financial ecosystem, compelling major banks to impose strict countermeasures.?

• Fraud is a growing problem in Nigeria's financial system, with over ?159 billion ($201.5 million) lost since 2020.
• Neobanks in Nigeria are becoming increasingly popular, but their relaxed transaction rules and flexible customer verification standards are making them a target for scammers.
• Fidelity Bank recently blocked transfers to four neobanks, including Kuda Bank, OPay, Moniepoint, and PalmPay, over lax anti-fraud and customer verification standards.
• Other major Nigerian banks are also considering blocking transfers to neobanks.
• This clash between neobanks and legacy banks highlights the challenges of balancing financial inclusion with fraud prevention.

Read more - https://techcabal.com/2023/10/30/banks-and-neobanks-fraud-problems/

Egypt, Türkiye discuss using local currencies in bilateral trade.

Egypt and Türkiye are exploring the possibility of using local currencies in bilateral trade. They also discussed origin verification and the exchange of contact points between the central banks of both countries. A study has been proposed to assess the possibility of establishing branches of Egyptian banks in Türkiye and vice versa.

The two countries are also working to enhance cooperation in a number of other areas, including:

• Removing technical and administrative barriers to trade
• Liberalizing agricultural goods under the Free Trade Agreement signed between the two countries.
• Coordinating on developing certain provisions of the Free Trade Agreement
• Establishing a RO-RO maritime transport line connecting the two countries
• Enhancing cooperation in the field of specifications and quality
• Identifying points of contact among stakeholders in the field of food legislation and regulatory activities, as well as in the industrial field

Egypt is also encouraging Turkish investment, especially in the Suez Canal Economic Zone.

Read more: https://www.dailynewsegypt.com/2023/10/28/egypt-turkiye-discuss-using-local-currencies-in-bilateral-trade/

Key Highlights from the NITRA FinTech Forum in Lagos:

• The Nigeria Communications Commission (NCC) sees the fintech industry as a major driver of financial inclusion in the country.
• The NCC's Executive Vice Chairman, Dr Aminu Maida, said that fintech has the potential to deepen the existing payment and financial system infrastructure to reach unserved and underserved areas as well as stimulate economic growth.
• He also noted that the fintech industry is creating new business opportunities, jobs, and investment.
• The Head of Partnership at Moniepoint, Ogie Efemena, said the payment space is doing well, with two billion transactions undertaken within the fintech space in 2022. However, he noted that this figure is small when compared to the country's population of 230 million.

Read more: https://guardian.ng/business-services/fintech-revolutionising-our-financial-system/

Apple unveils M3, M3 Pro, and M3 Max, the most advanced chips for a personal computer.

Apple has announced the M3, M3 Pro, and M3 Max chips, the first personal computer chips built using the 3-nanometer process technology. These chips feature a next-generation GPU, faster CPU, and more efficient Neural Engine.

The M3 family of chips also has an advanced media engine that supports AV1 decoding for power-efficient streaming.

• M3:?25 billion transistors, 10-core GPU, 8-core CPU, up to 24GB unified memory
• M3 Pro:?37 billion transistors, 18-core GPU, 12-core CPU, up to 36GB unified memory
• M3 Max:?92 billion transistors, 40-core GPU, 16-core CPU, up to 128GB unified memory

The M3 family of chips is expected to deliver significant performance improvements over the previous generation of M1 chips. For example, the M3 GPU is up to 65% faster than the M1 GPU, and the M3 CPU is up to 35% faster than the M1 CPU.

The M3 family of chips is expected to be available in new MacBook Pro and iMac computers in the near future.

Implications:

The M3 family of chips is a major milestone for Apple silicon. It demonstrates Apple's continued commitment to innovation and its focus on delivering the best possible performance and power efficiency in its personal computers.

The M3 family of chips is also a testament to the strength of Apple's ecosystem. Apple's ability to design and manufacture its own chips gives it a significant advantage over its competitors.

Read more: https://www.apple.com/newsroom/2023/10/apple-unveils-m3-m3-pro-and-m3-max-the-most-advanced-chips-for-a-personal-computer/

CBDC tradeoffs: financial inclusion vs. expanding tax base. Lessons from Africa

Central bank digital currencies (CBDCs) have the potential to boost financial inclusion and expand the tax base in developing countries. However, there are some trade-offs to consider.

In Africa, mobile money has been a success story, driving financial inclusion from 26% to 83% in Kenya.

In Tanzania, a direct tax on mobile money transactions led to a 38% drop in mobile P2P transactions and a 25% drop in cash-out transactions. The government has since reduced the tax, but the cash out figures have still not fully recovered.

These examples highlight the trade-off between using payment tools for financial inclusion and then using them for tax purposes. This is a consideration that will apply just as much to CBDCs in developing economies as it has to mobile money.

Read more: https://www.ledgerinsights.com/cbdc-tradeoffs-financial-inclusion-v-tax-africa/

Digital Health Funding and Deals in Q3'23: Key Insights.

1. Significant Decline: Digital health deal activity in Q3'23 witnessed a considerable slowdown, with deals plummeting by one-third, marking the lowest in nearly a decade. Furthermore, funding decreased by 14% QoQ, totaling $3B, the lowest since 2016.
2. Stability in Early-Stage Deals: Despite the overall downturn, the median size of early-stage digital health deals has remained consistent throughout 2023.
3. Mega-Round Activity: There was a slight uptick in Q3'23, with six digital health deals exceeding $100M.
4. Sector Leaders: Care delivery & navigation tech companies were the dominant players in Q3'23 in terms of deals and funding.
5. U.S. Trends: The U.S. also experienced a decline, with digital health funding and deals reaching their lowest in several years.
6. Relative Stability in Deal Sizes: Early-stage digital health deals in Q3'23 maintained their size in comparison to mid- and late-stage deals.
7. Mega-Round Significance: Digital health deals exceeding $100M accounted for the most significant portion of the quarterly funding since Q2'22.

Bottom Line: While Q3'23 saw a pronounced decrease in digital health deals and funding globally, early-stage deals remained steady, and there was a slight resurgence in mega-deals. Care delivery & and navigation tech companies led the charge, even as the U.S. market mirrored the global downturn.

Download full State of Digital Health Q3'23 report here - https://www.cbinsights.com/research/report/digital-health-trends-q3-2023/

Nature-based Climate Change Solutions for a Greener ESG Portfolio.

Carbon markets are a way to reduce greenhouse gas emissions by allowing businesses and individuals to purchase carbon credits from projects that offset their emissions. Carbon credits can be generated by a variety of projects, including nature-based projects such as deforestation prevention and afforestation.

Nature-based carbon projects are a critical component of addressing the climate crisis, but they can only contribute up to 20% of the mitigation needed. The remaining 80% must come from active emissions reduction efforts.

Despite their limitations, nature-based carbon projects offer a number of benefits, including healthier ecosystems, reduced likelihood of flooding and soil erosion, prevention of extreme weather phenomena, and social and economic livelihood for local communities.

Why nature-based carbon projects have gained traction:

• Nature-based carbon projects are relatively low-cost and can be implemented quickly.
• They offer a number of co-benefits, such as improved air and water quality, biodiversity conservation, and job creation.
• They can be implemented in a variety of settings, from rural to urban.

Implications for ESG investors:

ESG investors are increasingly looking to invest in companies and projects that are aligned with their environmental, social, and governance values. Nature-based carbon projects offer a way for ESG investors to grow their portfolios while also supporting the fight against climate change.

Recommendations for ESG investors:

• Conduct due diligence to ensure that nature-based carbon projects meet the highest standards of environmental integrity and social responsibility.
• Consider investing in a diversified portfolio of nature-based carbon projects to reduce risk and maximize impact.
• Support advocacy efforts to increase government and private investment in nature-based solutions.

Read more: https://investingnews.com/nature-based-climate-change-solutions-for-a-greener-esg-portfolio/

Biden administration aims to cut AI risks with executive order.

U.S. President Joe Biden is seeking to reduce the risks that artificial intelligence (AI) poses to consumers, workers, minority groups and national security with a new executive order on Monday.

It requires developers of AI systems that pose risks to U.S. national security, the economy, public health or safety to share the results of safety tests with the U.S. government, in line with the Defense Production Act, before they are released to the public.

Read more: https://www.reuters.com/technology/white-house-unveils-wide-ranging-action-mitigate-ai-risks-2023-10-30/

Mastercard to eliminate first-use PVC plastics from payment cards by 2028.

Key Highlights

1. Bold Commitment: By 2028, 萬事達卡 aims to completely phase out the use of first-use, PVC plastics in payment cards across its network. This move aligns with the company's sustainability goals and caters to consumers eager for environmentally friendly payment options.
2. Industry First: Starting January 1, 2028, all new Mastercard payment cards will be manufactured using sustainable materials, such as rPVC, rPET, or PLA. These cards will undergo a certification process to ensure their sustainability.
3. Support for Issuers: Mastercard will provide comprehensive assistance to its global partners as they transition from traditional PVC.
4. Sandeep Malhotra's Insight: Malhotra, Executive Vice President at Mastercard, emphasized the collective responsibility to address the global plastic issue. He highlighted Mastercard's unique position to drive a collaborative approach across its vast network of banks, financial institutions, and over 3 billion cardholders.
5. Past Initiatives: Mastercard's Sustainable Card Program, launched in 2018, has garnered participation from over 330 issuers across 80 countries. Since its inception, Mastercard has successfully transitioned more than 168 million cards, with 31 million in the Asia Pacific region, to sustainable materials.
6. Digital Focus: In parallel to its sustainability efforts, Mastercard also promotes digital-first card programs, which completely eliminate the requirement for a physical card.
7. Certification and Auditing: Every new card will undergo a certification process by Mastercard to verify its composition and eco-friendly claims. An independent third-party auditor will validate this certification, and certified cards will bear the Card Eco Certification mark.
8. Asia Pacific Reception: Mastercard's sustainability initiative has been well-received in the Asia Pacific region, with 90 issuers from countries like Japan, Australia, Taiwan, Singapore, and Malaysia already on board.
9. Partnerships for a Greener Future: In 2018, Mastercard formed the Greener Payments Partnership with card manufacturers to curtail the usage of first-use PVC plastic. Moreover, the Mastercard Card Eco-Certification scheme was launched in 2021.

Mastercard is taking decisive steps to combat the global plastic issue by transitioning to sustainable card materials. Their holistic approach combines internal initiatives, industry collaboration, and third-party validation, marking a significant stride towards a greener payment ecosystem.

Read more: https://ffnews.com/newsarticle/mastercard-to-eliminate-first-use-pvc-plastics-from-payment-cards-by-2028/

African venture capital investor reveals five sectors poised for growth.

Background:

• Global venture capital funding is down 48% in 1H 2023.
• Mikael Hajjar, co-founder of P1 Ventures, an Africa-focused VC firm, sees the downturn as an investment opportunity. The firm has supported 29 startups since 2020 and recently announced a US$25 million fund.

Mikael Hajjar, co-founder of Africa-focused venture capital firm P1 Ventures, believes that now is the time to invest in African startups. He highlighted five sectors where the firm sees opportunities:

1. Where crypto and fintech converge: P1 Ventures is bullish about its investment in Nairobi-based Kotani Pay, which provides a solution for people who want to convert crypto to fiat currencies and vice versa.
2. Making healthcare affordable: P1 Ventures is investing in Reliance Health, an integrated healthcare enterprise providing micro-insurance for medical coverage, round-the-clock telemedicine support, and medical services via its chain of private clinics.
3. AI-driven business intelligence: P1 Ventures believes that AI is the next leapfrog opportunity for the continent and is looking for companies that are building AI-driven businesses specific to the African context. One example is Lengo, a Senegalese company that uses a hybrid method of field agents and AI to link informal retailers and fast-moving consumer goods (FMCG) companies.
4. E-commerce customer retention in a tough economic climate: P1 Ventures led a round of funding in Gameball, a customer intelligence and marketing CRM platform that enables e-commerce marketplaces and consumer brands to retain customers through gamification of loyalty.
5. Creating online gaming communities: P1 Ventures is investing in Eksab!, an Egyptian company offering an online arcade for football fans to participate in fantasy football games and trivia contests.

Bottom Line:

P1 Ventures sees significant potential in the convergence of fintech and crypto, affordable healthcare solutions, AI-driven business insights, e-commerce customer retention strategies, and online gaming communities in Africa

“Fintech magic” – Are VCs culpable for African startups shutting down?

The Concern:

• Recent unexpected shutdowns of well-funded African startups, such as Ghana's Dash fintech (which raised $86.1 million), have ignited discussions about venture capitalists' (VCs) roles in such failures.

Core Issues:

1. VC-Startup Disconnect: Startups, in their bid to meet VC expectations, might inflate metrics. When on-ground realities challenge these inflated numbers, startups resort to drastic measures, eventually leading to potential closures.
2. Pressure on Startups: VCs' desire for high returns pushes startups to show rapid growth. This, at times, forces startups to deviate from their core mission and adopt unsustainable practices to match investors' aspirations.
3. Local Challenges: While VCs believe that high growth expectations are standard globally, they sometimes underestimate unique local challenges. Some experts feel VCs push startups to scale too quickly without accounting for market volatility.
4. Integrity Concerns: Instances have emerged where startup founders exaggerated metrics to secure funding. In some cases, like Dash, numbers were inflated by up to 5 times within a few months, only to be unsustainable in the long run.
5. Currency Issues: VCs often prefer reports in dollars, despite customers transacting in local currencies, leading startups to possibly adjust figures to fit VC benchmarks.

Stakeholders' Perspectives:

1. VCs' Defense: VCs believe their investment models suitable for Africa's potential and expect startups to be transparent in their valuations without resorting to data manipulation.
2. Founders' Role: Founders sometimes are complicit, overstating metrics to gain desired funding. This embellishment can be further motivated by the aforementioned currency issue.
3. Local Expert's Take: David Adeleke from Zeeh Africa feels some VCs are short-term focused and don't fully factor in market volatility.
4. Kenya's Perspective: Jason Njoku emphasizes startups should focus on genuine problem-solving and sustainable growth, rather than merely chasing funding and unchecked expansion.

The Way Forward:

• A more harmonized understanding between VCs and startups is vital. VCs should recognize the unique challenges in Africa, offering patient capital that allows startups to operate sustainably.
• Startups should maintain integrity in reporting, ensuring realistic valuations that genuinely reflect the market.
• For Africa's tech ecosystem to flourish, both investors and founders must foster transparency, set realistic goals, and maintain a long-term vision. This approach will ensure startups harness their potential without jeopardizing their future.

Read more: https://www.techinafrica.com/examining-the-role-of-vcs-in-african-startup-failures/

German Economy Shrinks Slightly In Third Quarter.

• The German economy shrank by 0.1% in the third quarter of 2023, the first contraction since 2020.
• This is due to a number of factors, including high energy costs, a sluggish manufacturing sector, and rising interest rates.
• Many analysts expect Germany to enter a recession in the fourth quarter of 2023.
• The International Monetary Fund believes Germany will be the only major advanced economy to contract in 2023.
• The European Central Bank has kept interest rates steady after 10 consecutive hikes, in a bid to support economic growth.

Read more - https://www.ibtimes.com/german-economy-shrinks-slightly-third-quarter-3716964

Farm biosecurity is essential for safeguarding agriculture and securing our food supply. Innovation in farm biosecurity is transforming how we protect our farms, with advanced technologies such as drones, big data analytics, genomic sequencing, smart farming, biotechnology, blockchain, and AI playing a key role.

1. Advanced Surveillance: Drones, satellite imaging, and remote sensing technologies allow early detection of diseases and pests, enabling rapid, targeted responses.
2. Big Data & Analytics: Data-driven insights help predict disease outbreaks, optimize resources, and streamline biosecurity measures.
3. Genomic Sequencing: Quick identification of pathogens enables effective outbreak responses and vaccine development.
4. Smart Farming: IoT technologies allow remote monitoring and management of biosecurity, sending real-time alerts on potential threats.
5. Biotechnology & Genetic Engineering: Development of disease-resistant genetically modified crops minimizes chemical pesticide use. Biotech also aids in creating livestock vaccines.
6. Blockchain & Traceability: Blockchain ensures transparency in the agricultural product journey, confirming biosecurity standards and providing consumers with information on food safety.
7. AI & Machine Learning: These technologies analyze extensive datasets to forecast disease outbreaks, automate diagnoses, and suggest biosecurity measures.
8. Training & Education: Continuous learning for farmers on best practices and disease response strategies is fundamental.

Conclusion: Embracing these innovations will be pivotal in overcoming challenges like emerging diseases and adapting pests. This adoption will shape a more resilient and biosecure agricultural landscape for the future, ensuring a sustainable path for the industry.

Read more: https://www.swineweb.com/canada/innovations-in-farm-biosecurity-safeguarding-agriculture-for-a-sustainable-future/