Investing time, connecting dots & staying in the game
Much of what happens around us is connected - be it as a family, company, country, species or other association. We stand to gain much by understanding & making connections across different facets of our lives.
This week’s newsletter starts with the basics - inflation & interest rates, how these relate to investments into tech startups, and some notes on competitiveness.
I also have a new level of respect for ‘older’ athletes who are still competing against players half their age (like LeBron James) - more on this below.
RUNDOWN
Inflation lower, but what does it mean for you?
The story
Kenya’s Inflation Falls to 3.6% in September [Link]
What happened?
The Kenya National Bureau of Statistics released inflation data for the month of September 2024 with the declining trend continuing. Year on Year (YoY) inflation now stands at a multi-year low of 3.6% compared to 4.4% registered in August 2024 and 6.8% registered in September 2023.
So what?
Despite the continued drop in inflation, three big components contributed to the YoY rise i.e. Food & Non-Alcoholic Beverages (+5.1%), Housing, Water, Electricity, Gas & other fuels (+2.6%) and Transport (+0.5%).
Collectively, these three categories account for over 57% of the weights of the 13 broad categories used to calculate the Consumer Price Index.
Should you care?
September’s drop precedes CBK's upcoming MPC meeting where a rate cut is expected (more below).
Inflation trending towards the lower end of the CBK’s target inflation range (i.e. 2.5% to 7.5%) gives the central bank room to cut rates to stimulate economic activity.
Lower rates will reduce the cost of loans (encouraging borrowing) and also reduce yields on fixed income investments (including MMFs and bonds).
Inflation is a key economic indicator. It’s worth having a fair understanding of how it works and connects to two other key indicators i.e. exchange rates & interest rates, as it impacts you whether you’re an entrepreneur running a business or an investor seeking return.
SPOTLIGHT
Slower growth, more new investment products & some startups funded
Here’s what I picked from the news in the week in investing, tech & investing in tech that’s worth knowing:
Treasury bill rates have continued trending lower in oversubscribed auctions as the market expects the CBK to cut rates at its upcoming MPC meeting (Oct 08).
Kenya’s GDP growth rate fell to a 2-year low, expanding 4.6% in 2Q 2024, down from 5.6% in 2Q 2023. The finance ministry has projected 5.2% GDP growth for 2024.
Busy week in the wealth management space as 3 players, Ndovu (wealth-tech), Britam (asset management) and Standard Chartered (bank), launched more investment products for their customers.
Kenya, targeting annual tourist numbers to hit 5mn in 2027 from 1.95mn in 2023, has launched a Digital Nomad Work Permit as the number of digital nomads estimated at 40mn globally, continues to grow.
Bloomberg is taking submissions for its inaugural African Startups to Watch list, aiming to highlight best innovations. Details to apply here.
STORY
Some thoughts on the state of VC funding for African tech
In mid-September, the US Federal Reserve (the Fed) lowered interest rates by 50bps – huge for the US – from a 23-year high range of 5.25% - 5.50%. This may be interpreted as confidence in the US economy, but it’s also an election year.
In capital markets, whether private or public, there’s generally an inverse relationship between the Fed’s rates and the flow of capital globally.
Higher rates (as had persisted for a while) tend to make US domestic returns more attractive, compared to other markets where the USD can be deployed.
How does this relate to VC funding?
With high rates, the cost of borrowing USD increases, which makes venture capital more cautious. High interest rates create more attractive, lower risk investment alternatives, such as bonds, reducing appetite for high risk startup investments.
This particularly affects VC deployment to riskier emerging markets. As capital becomes more expensive, investors prioritize stable returns, limiting their exposure to startups.
Over the last two years, funding of startups across Africa has dropped significantly. Two stats last week were impossible for me to ignore:
African startups raised just USD 306mn in 3Q 2024 taking the year’s running total to USD 836mn which is 40% lower than the same period in 2023 at USD 1.4bn (which was also 48% lower than the same period for 2022).
Only 286 VC investors participated in at least one deal worth USD 100k or more in 1H 2024 compared to 393 investors in 1H 2023 and 698 investors in 1H 2022.
VC funding cyclicality could almost make it seem like innovation is seasonal. But if you’re building a business that’s externally funded, it would serve you well to understand the factors that influence investment decisions.
The tide may be turning, but it will take some time for the trend to reverse, and we still live in uncertain times on the brink of war so anything could happen. Plan for the best, prepare for the worst.
NOTES TO SELF
Revisiting the foundations of my competitive nature
I paid a visit yesterday to my former high school (not Alliance) for Sunday basketball - an old tradition that had died down and is currently being revived.
For context, I last played competitive basketball in high school, and that’s a little over 20 years ago (millennial)! Except for 3 others, most of the players were very young! So within a few minutes of play, I have no shame in admitting that my palms were sweaty, knees weak and arms heavy (no spaghetti).
Through the games, my mind couldn’t help but carry me back to my teenage years — to try see how my thinking on the court back then served me through life.
A few ideas crossed my mind around competition & competitiveness. Here are my starting five:
Be relentless, but know your relative weaknesses & play to your advantage;
Even in a physical situation, competition is a mind game;
You can learn a lot from your competitors by first acknowledging all the places they could hold an advantage over you;
It’s always You versus You in the end; your first & last competitor should be yourself;
Take pride in your wins, but don’t linger too long - on to the next one!
All in all, time well spent. Highly recommend.
CURIOUS
Why do you waste time?
Do you ever waste time? You should.
In this short video, Robert Greene, discusses the idea of finding activities that serve as a “Productive Waste of Time” for you.
For me, this is valuable for two reasons: i) mental clarity; and ii) connecting ideas.
If you’ve read this far, I’d encourage you to ‘waste’ 5 minutes listening to it.
My background is in everything I've done in my past. So is yours. Society incorrectly tends to reduce it to one main thing or industry.
I spent most of my time in the world of investments but I've also done many other things like start a rock band, take a chance on building a VC-backed tech startup and a lot in between.
In zooming out, I’ve appreciated that principles of investing are transferable if well understood, given that we live in a mostly capitalist world.
But since no one is a single thing and life is interconnected, I’m also using this newsletter to transfer principles on the mindsets that I've needed to perform at the highest levels as I prepare to play my next game.
I invite you to join the journey.
Have the best week possible.
AG