Category: WORLD BUSINESS & ECONOMY

Charles Abuede

Digital payments, the biggest income wellspring of the worldwide Fintech market, are set to hit $4.4 trillion in exchange value this year, and China and the United States are expected to contribute 65 per cent of that value as the world’s two biggest digital payments businesses.

Data compiled and reported by BuyShares and made available to Business A. M. also show that there will be a 5 per cent drop when compared with the figures pre-COVID-19.

Exchange value to jump 85 % in 4 years

The Statista 2020 Fintech survey revealed that the advanced digital payments section combines payments for products and services made over the internet and mobile by means of cell phone applications. Consequently, China is expected to produce $1.9 trillion worth of transactions in 2020, or almost 45% of every single payment made digitally this year.

Similarly, the U.S., positioned as the second biggest market, is expected to generate $895.7 billion transaction value and a 20 per cent piece of the pie in 2020. In the same vein, Japan, The United Kingdom and South Korea follow on the list with $165.2 billion, $164.4 billion, and $113.5 billion worth of transactions, respectively.

Despite the fact that the coronavirus pandemic has influenced the whole Fintech industry, the data unveiled that the digital payments industry forerunners are set to observe noteworthy development in the next few years, with the Chinese market expected to surge by 84 per cent with a combined transaction value reaching $3.5 trillion while the U.S is projected to reach $1.5 trillion, rising by 67 per cent.

Although Europe’s share is impressively littler than those of the two leading regions, the Statista survey uncovered the old continent indicated the most huge growth in digital payments. The whole European payments industry is required to blast in the following four years, developing by a CARG of 18.7 per cent and reaching about $1.6 trillion value of transaction by 2024.

Meanwhile, the worldwide digital payments industry is figured to bounce by 85 per cent and reach $8.2 trillion in 2024.

30 per cent of digital payments users live in China

Recent years have seen a flood in the number of individuals handling digital payments, with the figure developing from 2.7 billion in 2017 to over 4.6 billion in 2020. In the next four years, the number of clients in the industry is set to reach 6.4 billion.

However, statistics have revealed that most digital payments users live in China. three years before now, the number of Chinese using online payments had taken off from 840 million to 1.3 billion, accounting for almost 30 per cent of all clients globally. This figure is relied upon to hop over 1.6 billion in 4 years time.

The U.S is set to arrive at 305.7 million users in the digital payments market in 2020, four times less than China. According to Statista 2020 Fintech Survey, this number will ascend to 353 million by 2024, as the number of Europeans using the payments platform is gauged to grow by 24 per cent in 4 years time, arriving at 721.7 million by 2024.

World oil-producing giant, Saudi Arabia, has recorded an oil revenue deficit of $29 billion for the second quarter of the year due to continued drop in oil prices and oil demand, which affected the incomes of oil producing and exporting countries.

A Reuters report monitored by Business A.M. revealed that the country’s oil incomes for April to June fell by 45 per cent, with the total budget incomes falling 49 per cent in the past a year past.  Although, Saudi Arabia has taken some austerity strides as of now trying to get control over public spending and alleviate the effect of the oil emergency on its economy, but it now appears to be that more would be required, the agency reports.

Monica Malik, chief economist at Abu Dhabi Commercial Bank, is quoted by Reuters as commenting on the deficit thus: “A pullback in spending is basic for containing the deficiency. The proactive position of the government was at that point reflected in the severity measures declared in April. In any case, these will dampen the recuperation outlook.”

So far this year the Saudi government has declared a cut in 2020 spending of $13.2 billion through “a partial decrease in certain things with the least social and economic impact,” alongside significantly increasing value-added tax to 15 per cent from 5 per cent, and a suspension of the purported cost-of-living stipends for all Saudi public officials, who are most of Saudis in employment.

Those familiar with the issue, while commenting, said the issue with these austerity measures is that they may slow down the economy’s recovery once the emergency crisis is finished. What’s more, the way that the Kingdom had fashioned plans to borrow in order to get past the most exceedingly awful part of it isn’t helping either, on the grounds that loans should be repaid.

For the time being, there is a solid enthusiasm for Saudi debts, but, to be sure that we are indeed past the peaks of oil demand, this may change after a short time. So far this year, Saudi Arabia has borrowed nearly $13 billion on the international and local markets.  Meanwhile, the IMF anticipates that Saudi Arabia’s economy should shrink by 6.8 per cent this year with the Kingdom itself calling the figure negative.

Charles Abuede

Unicorn companies canvassed and have raised $26.5 billion in funding since the start of 2020, in spite of the slowdown in capital financing brought about by the COVID-19 pandemic, data made available to Business A.M. show.

A unicorn company is a startup with a valuation over $1 billion.

According to information put together by AksjeBloggen.com, recent years have seen a ten times increment in the number of unicorns, climbing from less than 40 in 2013 to very nearly 400 in July 2020.

The noteworthy developments of these privately owned businesses with a market valuation of more than $1 billion have been trailed by the expanding number of venture capitalists ready to put resources into their business.

Total funding amassed climbed by 310 per cent in 3 Years

In 2016, unicorns throughout the world brought $29.8 billion up in financing rounds, with the aggregate value of ventures coming to $61.8 billion that year, according to data compiled by CrunchBase. During the following year, billion-dollar new businesses raised another $47.3 billion, with the total estimation of investments hopping to $109.1 billion before the end of 2017.

Statistics revealed that 2018 saw the most noteworthy increment in the total value of raised assets, with the sum coming to $192.3 billion, reaching $83.2 jump year-on-year. New $74.8 billion worth of funding rounds continued in 2019, with the total measure of unicorn investments coming to $267.1 billion in the final quarter of 2019.

The first quarter of 2020 conveyed $13.8 billion worth ventures of billion-dollar new businesses. This value slipped to $9.6 billion in the second quarter of 2020, practically a 40 per cent drop year-on-year. All things considered, statistics show the aggregate financing sum surged by 310 per cent over the last three years.

Asian unicorns lead in the estimation of raised funds, with $163.4 billion in absolute funding sum. United States’ organisations follow with $110.5 billion worth of investments. Data demonstrate the two jurisdictions together account for 94 per cent of all investments into unicorn organisations.

3 Largest Unicorn Funding Rounds in 2020 climb to $4.6 billion in Value

Data also show that internet unicorns lead in the overall total of raised sum, with $86.1 billion worth of investments starting in July.  The Fintech space represents the second-leading industry with $58.2 billion worth of funding rounds. Also, e-commerce, software and financial services follow with $53.8 billion, $43.7 billion and $42.8 billion, respectively.

The CrunchBase data also show that the three biggest unicorn financing rounds in 2020 came to $4.6 billion in value. On March 4 2020, the main Chinese real estate financier platform, Beike, brought more than $2.4 billion up in a D funding round led by SoftBank, the biggest investment in 2020. The organisation declared it would utilize this money to improve the productivity of China’s residential services.

The Southeast Asia-based ride-hailing organization, Gojek, raised $1.2 billion that month, the second-biggest funding round since the start of the year. Though a portion of Gojek’s financial investors includes Tencent, Google, and Temasek, the organization intends to extend its operating activities with this funding round.

Meanwhile, numbers show that Yuanfudao’s most recent financing round stands as the third-biggest unicorn investment in 2020. The Chinese online instruction stage brought $1 billion up in March in another financing round spearheaded by Tencent Holdings and private value firm, Hillhouse Capital Group.A

• Piles of debt almost equivalent to entire nations, like South Africa or Hungary
• Daimler and BMW also in top 10 with debts of $151bn, $114bn respectively
• Despite debts: Volkswagen has second-highest EBIT margin of all car manufacturers after Toyota

Charles Abuede

New data gathered by Kryptoszene and made available to Business A.M. show that German automaker, Volkswagen Group, one of the world’s leading manufacturers of automobiles and commercial vehicles, has ranked tops in a list of the world’s most heavily indebted firms, amassing a debt profile of $192 billion.

According to the data, the automotive group’s heap of obligation is equivalent to that of whole countries, for example, South Africa or Hungary. The entirety of this debt is in spite of the way the Wolfsburg, Germany-based manufacturer is exceptionally beneficial also, having the second most noteworthy earnings before interest and tax (EBIT) edge of any car maker.

The data also show that two other German automotive groups, alongside Volkswagen, are among the ten organisations with the highest debt burden, and these are Daimler and BMW with debts of $151 billion and $114 billion respectively.

A further examination of the financial information from the 900 biggest organisations by market capitalisation reveals that US businesses ranked overall as the highest debt-burdened companies with a combined $3,908 billion; Germany based organisations ranked second with $762 billion; with Japanese and British companies following with $734 billion and $539 billion respectively, while French firms posted debt burden totalling $403 billion.

Top 10 companies with the largest growing debts in the world

Based on the ranking, Volkswagen tops the chart with over $192 billion, followed by United State’s AT&T inc. with $176 billion. Mercedes owned Daimler, Toyota and Softbank are also on the log with $151 billion, $138 billion and $135 billion respectively. Verizon Communications, Ford and German BMW follow accordingly with $129 billion, $122 billion and $114 billion; while Comcast Corporation and Anheuser Busch are at the bottom with $104 billion and $96 billion respectively.

Most profitable automotive groups globally by EBIT margin

Standing out by far as the most innovative automobile group, Volkswagen does in different regards stand out, as is shown by an index ranking companies by innovations and world firsts in various areas of technology. In terms of profitability, Volkswagen also occupies a driving position in an industry comparison, with an EBIT margin of 7.3% in 2019. Only Toyota scored better with EBIT of 8.4%.

Although, Volkswagen’s sales between 2015 and 2019 have averaged about 230 million euros (213.29m, 217.27m, 229.55m, 235.85m and 252.63m) for the five years in which the company’s car division accounted for 72 per cent of the sales, while financial services, commercial vehicles and power engineering accounted for 16, 10 and 2 per cents, respectively for the five year period.

In spite of the foregoing, Volkswagen, which has been termed the most intensely obligated undertaking on the planet, leads the way in innovation and has a higher research budget than tech giants like Microsoft and Apple as well as other car manufacturers.

• Company to undergo restructuring resulting from the Covid-19 effects
• Reports $56m rough diamond sales in Q2 2020

In the wake of the Covid-19 pandemic which has caused uncertainties and volatilities in the market, De Beers Group, regarded as the world’s largest and oldest diamond company is set to undergo restructuring following the crumpling of diamond sales globally.

A monitored Bloomberg report stated that the company “is considering ways to restructure mines, expand in jewellery and overhaul diamond sales,” summing up that it must “rethink its entire business in the industry left paralyzed by the pandemic.”

The report, however, showed that there isn’t going to be a V-shaped recovery for the diamond industry this year as the trade has been ruthlessly damaged by the virus-induced downturn, as diamond consumers across the world can no longer afford the pricey commodities.

Although diamond sales were on the decline with De Beers before the global downturn; thus resulting in the loss of marriage interest by the younger generation as their fiancés, with overwhelming debts and low or zero savings made it near impossible to budget enough money for weddings and a diamond ring.

The insurgence of the big bad COVID-19, led to a further collapse in consumer finances, leading to a period where jewellery stores were closed around the world, pounding pressures on De Beers, who had reported a 4 per cent fall in diamond sales from 2019 to $56 million in rough diamonds sales in 2Q20. Notwithstanding, RBC expects the diamond company to post a $100 million loss in 1H20.

In a related development, Mark Cutifani, CEO of Anglo-American Plc, which pedals De Beers, stated that a global spin was approaching for the industry, and then the virus outbreak in China belated the rebalancing.

In the words of Cutifani, “We’ve highlighted several factors for why diamond demand has plunged in the last several years. First, the trade war between the US and China led to stock market volatility and uncertainties in regional economies in the East and West hemispheres. This led to a slowdown in world trade growth, especially in mainland China. Less demand from mainland China was visible in Hong Kong in 2018 and 2019. When riots broke out in Hong Kong in the summer of 2019, Mainlanders avoided Hong Kong altogether, crushing the jewellery industry even more.

“At the same time, midstream inventory was increasing in North America as US’ bricks and mortar’ retail outlets closed. US jewellery sales have declined in the last several years due mostly to highly indebted consumers, leveraged up to their eyeballs in auto debt, credit cards, and student loans that have limited their economic mobility,” Cutifani revealed.

Meanwhile, Bruce Cleaver, De Beers CEO has told employees, in an email, during the week that it will “narrow the gap between its revenue and costs.” and warning that the demand for diamond would slouch in the near period.

Speaking on the impact of the pandemic, Cleaver said: “Covid-19 has compounded and exacerbated difficulties that already existed in the diamond world. These difficulties, which have inhibited our growth over the past several years, have become even more urgent to address. They require us to act now to protect the short-term the health of the business while refocusing and reorienting it to realize our long-term potential”.

Hussein Sayed, Chief Market Strategist at FXTM

Tensions between the world’s two largest economies are on the rise. After ordering the shutdown of China’s consulate in Houston and claiming two Chinese hackers targeted US companies working on the virus and stealing information, we are yet to see the Chinese response. US-China relations have already been worsening since the beginning of the year on several fronts including the handling of the coronavirus, cutting Huawei’s operation in the US and abroad, revoking Hong Kong’s special status after China imposed a new national security law on the city and several other issues. However, the closure of a consulate is unprecedented and could take the cold war onto a new level.

The market reaction to the latest developments has been muted. US stocks managed to end Wednesday’s session near their multi-month highs, the Dollar continued its downward trajectory against its major peers and the damage was limited to Chinese equities and the Yuan to some extent – which is trading back above seven against the Dollar. Hopes for another round of US stimulus and better than expected earnings from the big tech firms is keeping the rally alive despite valuations becoming extremely overstretched. But if worsening US-China trade relations lead to re-imposing trade tariffs, then it’s likely to mark the short term top in equities.

Better than anticipated earnings from the likes of Tesla and Microsoft are not the true reason why stocks are at current levels. It is because monetary and fiscal intervention have left few options for investors to park their money. Consider that high investment grade bond yields dipped below 2% for the first time ever yesterday and that US 10-year Treasuries are yielding 0.6%, which when subtracting inflation, will leave investors with a negative return of 0.9%. That is a huge disruption to how markets function in normal times, but policymakers on the fiscal and monetary side are obliged to take these steps to prevent the economy from collapsing, even though they know their measures are creating bubbles in several asset classes.

Gold continues to be a safer bet than chasing overvalued stocks. With yields expected to remain low for a long time, inflation projections likely to head higher in the months to come and geopolitical tensions on the rise, some great ingredients are present for the precious metal to continue attracting inflows. Only $50 away from the all-time high, it is only a matter of short time for the yellow metal to see a new record.

• Examines investment opportunity for Africa’s recovery

Aware that COVID-19 has triggered an unprecedented demand for digital innovations and an acceleration of the digital economy, and a need to harness such opportunities into viable projects for growth of African economies, Africa50, an infrastructure investment platform, believes that African national governments’ investing in digital infrastructure post-covid-19, is critical to Africa’s economic recovery.

To this end, Africa50 with an investor base currently of 27 African countries, is organising a continent-wide discussion on the topic: “Why Investing in Digital Infrastructure Post-COVID-19 is Critical to Africa’s Economic Recovery.” During the session, speakers will share their experience and thoughts on how such opportunities can be turned into viable projects that will make Africa more resilient during and after the coronavirus crisis, while driving economic growth.

The virtual discussion which holds on 29 July, has confirmed speakers including: Alain Ebobissé, the chief executive officer of Africa50; Paula Ingabire, minister of ICT, Rwanda; Yolanda Cuba, group chief digital and FinTech officer, MTN; Amrote Abdella, regional director 4Afrika Initiatives, Microsoft; Akinwale Goodluck, head of sub-Saharan Africa, GSMA, and Rebecca Enonchong, founder & CEO, AppsTech; while Chris Bishop, head of programming, CNBC Africa would moderate the discussion.

Some media organisations across the continent, including Business A.M. Nigeria, are among those invited to participate at the discussion.

The discussion is seen as a wake-up call by discussants and Africa50 to national governments in Africa to explore the widening opportunity presented in digital infrastructure as a new normal economic project that could drive growth across Africa. This is more so, given the shattering socio-economic effect faced by the African economies due to Covid-19.

Several surveys by global agencies say that African economies would be particularly hard-hit by the ravaging effects of Covid-19. The World Bank says some 49 million people, 23 million in sub-Saharan Africa, could be driven into extreme poverty in 2020 due to Covid-19. According to an OECD policy responses to Coronavirus report: “COVID-19 and Africa: socio-economic implications and policy responses,” the pandemic’s shock to African economies is coming in three waves: (i) lower trade and investment from China in the immediate term; (ii) a demand slump associated with the lockdowns in the European Union and OECD countries, and (iii) a continental supply shock affecting domestic and intra-African trade. “It is shaking commodity-driven growth models that had largely failed to create more and better jobs or improve well-being,” the OECD policy brief said.

Africa50 is an infrastructure investment platform that contributes to Africa’s growth by developing and investing in bankable projects, catalyzing public sector capital, and mobilizing private sector funding, with differentiated financial returns and impact. Its investor base is currently composed of 27 African countries, the African Development Bank (AfDB), the Central Bank of West African states (BCEAO) and Bank Al-Maghrib, with over $870 million in committed capital.

 

 

Charles Abuede

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Employees at American streaming giant, Netflix, led those of other tech big names, Apple, Facebook, Alphabet and eBay in revenue generated per head, as they averaged $2,343,773 in the 2019 financial year, according to data accessed by Business A.M.

The data gathered and released during the second quarter of 2020 by BuyShares revealed that the tech startup, which boasts of over 192 million paying subscribers, tops the chart in the tech category, and it is followed by Apple employees who generated $1,899,051 per head.

The data also show that among the analysed tech companies, the social media giant, Facebook, came third with $1,573,072, followed by Alphabet, the parent company to search engine giant, Google, whose employees each generated $1,361,298 in revenue. Fifth on the log was online retail platform, eBay with $812,030, which was followed by PayPal with $766,034; Twitter, $705,986. Chinese based Alibaba Group employees generated $612,117 on the average, and Amazon closed the category for the analysed tech companies with each of its employees generating $351,531.

Overview of Netflix paying subscriber base growth

The information in the data shows that the revenue growth at Netflix was attributed to its steadily growing user base, with the 2019 financial showing that the number of Netflix paying streaming subscribers grew by 797.42 per cent globally between the third quarter of 2011 and the second quarter of 2020.

While the streaming giant could boast of 21.5 million paying subscribers at the close of the third quarter of 2011, by the end of June 2020, the company’s numbers had risen astronomically to 192.95 million.

A further examination of the data shows that Netflix added about 10.09 million new paying subscribers during Q1 2020. The 192.95 million represent 85.49 per cent increase from 104.02 million recorded during Q3 2017; and global paying subscribers hit the over 100 million mark for the first time during Q3 2017.

 

Netflix is adding new subscribers at an astronomical rate despite growing competition.

The pandemic appears to have come as a blessing in this case with Netflix among companies that have benefitted from the coronavirus pandemic, where it kept millions of people who focused on streaming to pass time at home. Remarkably, pandemic growth should be noticed with care bearing in mind that the company was relishing an organic growth in the number of paid subscribers pre-pandemic.

Furthermore, Netflix, unlike its competitors, enjoys a big streamer base since it is available globally. Disney is among Netflix’s major competitors but available in only selected countries. If it was accessible globally, Netflix’s paying subscribers chart would be different. Additionally, with a focus on customer experience, Netflix has continued to dwarf competitors in the industry, the report stated.

The expert opinion on the future of Netflix

According to experts in the industry, “the future growth of Netflix might be an interesting subject since the company is spending more on content, something that might directly translate into new subscribers. It leaves the option of spending more to market content. Although Netflix has begun spending more on original content, the reliance on licensed content might not be profitable in the long run. Some of the licensed content appears to perform better than original content. Netflix, however, does not release its viewing data.”

Major talking points to consider from the released 2019 financials of tech companies

• Generally, revenue per employee is less in the industries which are labour demanding but high in tech companies with low labour concentration like Netflix. Although, most enterprises aspire to generate high revenue per employee by maximizing on factors like hiring policy.
• Employee turnover requires a company to interview, recruit, and nurture new workers to make a profit for the company. Notwithstanding, revenue per employee is usually impacted by the company’s turnover rate. For Netflix, its hiring mechanism is the best for the tech industry considering the huge amount generated.
• Furthermore, the age of a company also determines the revenue per employee rate. Young companies that are hiring to fill key positions might still have relatively small revenue. Such firms have a lower revenue-per-employee ratio than more established companies

 

Charles Abuede

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The African Development Bank (AfDB) said it is involved in a joint partnership with other global syndicates of commercial and development financial institutions to finance the $20 billion Mozambique Liquefied and Natural Gas (LNG) project with a $400 million senior loan signing. The project is regarded as the single largest foreign direct investment in Africa till date.

The announcement comes few days after Total, Bharat Petroleum, Mozambique’s national oil and gas company and other global teams of energy operators and developers came together to append signatures to the financing of the project estimated to cost over $20 billion.

Speaking on the loan signing, Abdu Mukhtar, director of AfDB’s industrial and trade development department, noted that endorsing the Mozambique LNG Area 1 agreement announces a new era of industrialization for Mozambique, as gas purchasers have the potential for improving competitiveness in the region as well as globally, such as fertilizer plants.

According to the statement by the AfDB, the project, which benefits from one of the world’s largest natural gas reserves, off the coast of northern Mozambique, will be the country’s first liquefied natural gas development. It will initially consist of two LNG trains with a total capacity of around 13 million tonnes annually.

In a related development, the bank along with other financiers will be involved in funding the onshore and offshore components of the project by a combination of:

• Equity,
• Export Credit Agency (ECA) direct loans,
• Commercial bank loans and loan facility from the AfDB,
• Pre-completion cash flows and over $14 billion in senior debt facilities.

“Through the availability of domestic gas, the project stands to facilitate the development of gas-fired electricity in Mozambique. This will play a key role in providing reliable and affordable energy for the country and the wider region,” said Wale Shonibare, director for energy financial solutions, policy and regulations of the AfDB. He also stressed that the project will create a new energy model in the country and also help electrify South Africa.

Souley Amadou, the bank’s acting general counsel, commenting on the project financing, said “This is first in a class transaction that sets a new standard for mega-projects on the African continent. The collaboration and unity of purpose between the sponsors, government of Mozambique, the financing parties and advisors were truly remarkable.”

AfDB experts, who analyzed the transaction, lauded the move by the bank and its funding partners, noting that the project is in line with the institution’s High 5 strategic priority. They say it will:

• Boost universal electricity access,
• Offshoot growth economically, and
• Improve livelihoods.

Charles Abuede

A set of data obtained by Business A.M. have revealed that the top tier companies in the global fintech space raised a total of $3.81 billion in funding in the second quarter of 2020. The substantial sum comes amid the economic downturn of the first quarter of the year, data from BuyShares revealed.

Reviewing how fintech funding got impacted by coronavirus pandemic in the first three months of 2020, the data revealed that online payment processing platform, Stripe, amassed $850 million, followed by Robinhood which raised $430 million while Vero got $241 million.

Also, health insurance company, Oscar, raised $225 million, just as Carta closed the top 5 categories with $210 million fund raising. Basically, these five account for 51.34 per cent of the total money canvassed by the firms in the review.

A further examination of the data with respect to the second quarter of the year shows that Fundbox gathered $200 million, followed by Airwallex with $160 million. Meanwhile, Checkout.com-backed Marqeta and Brex raised $150 million each, just as Aspiration raised $135 million, followed by UK’s Starling Bank with $123 million.

Other Fintech firms that raised major sums include Stash with $112 million; N26 raised $100 million; Onfido gathered $100 million; Bought By Many did $95 million; Monzo, $75 million; Trade Republic, $73 million; SolarisBank,  $67 million; Taxfix, $64 million; Alan, $55 million; and Lunar, $50 million. The funding comes as a step in the course after a blustery Q1 owing to the pandemic.

“The coronavirus pandemic led to an economic downturn, presenting a perfect opportunity for the fintech sector to explore different opportunities for mass adoption. Most specifically, the pandemic resulted in a change in consumer behaviour that might stick around for a long time,” said the BuyShares report.

How has the fintech companies fared with the market caps?

However, an overview of the market capitalization of payment companies at the end of Q1 and Q2 2020 had PayPal with a market capitalization of $112.3 billion at Q1 ending, rising by $92.3 billion to $204.6 billion after 3 months. Similarly, Shopify, with a market cap of $48.8 billion was second highest at the end of Q1, but increased to $64.5 billion three months later.

Third on the log, was Adyen, which had a market cap of $25.5 billion as at end of Q1, but dropped to $18.6 billion three months later. Square, on the other hand, had $22.8 billion as at Q1 and had this figure rise by $0.5 billion to $23.3 billion by the end of Q2. MarketAxes was fifth in the ranking with $12.6 billion by end of Q1, but rose to $19 billion three months later.