My Brain Food This Week...
The ANC picks a coalition partner, Saudi are done with the petrodollar, venture capital in Africa, and Elon gets his $56 billion Tesla package
What caught my eye:
After failing to gain a majority in the recent national elections in South Africa, the ANC has decided to form a coalition government with its largest opponent, the DA predominantly, but will include other smaller parties. What does this mean?
Last week financial markets reacted unfavourably to the rumours that a coalition government wouldn’t largely feature the DA, which is seen by some as one of the more stable political parties in SA.
The ANC seems to have received that memo in an effort to not rock the boat, as a lot of eyes are on the ANC and their plans to rebuild a stagnating South African economy with high unemployment and record high youth unemployment.
The worry of productivity remains because the ANC and the DA have a lot of tension so it’s reasonable to wonder how many effective policies can be passed during this partnership.
Saudi Arabia has decided to end its petrodollar agreement. What does this mean?
The petrodollar is an agreement signed between the U.S. and oil producing countries in the Arab region to denominate and sell oil in U.S. dollars. Saudi Arabia no longer sees the value of this and is deciding to sell oil in any other currency. It’s early days but there’s been louder talk of global trade no longer being done in U.S. dollars as many regions are frustrated with the United Sates’ use of the dollar to bully countries in relation to trade terms and sanctions. The question remains: what’s a viable replacement for the U.S. dollar?
The venture capital space in Africa is showing a tame rebound, suggesting that risk capital is still on the sidelines. Why?
Global economies are still not rebounding as quickly as many would have thought after Covid. Inflation remains sticky and interest rates remain tight in most markets. Despite high inflation we’re starting to see sentiments for easing financial conditions pioneered by Argentina and the EU.
U.S GDP has grown at a slower rate for 2 quarters in a row from Q3 2023; since Q3 2021 EU GDP has been flat and is coming off a contraction in Q4 of 2023; and South Africa’s GDP has been trending lower since Q4 of 2020 and locked in another contraction in Q1 this year.
Until we see an easing in financial conditions globally, especially from the Federal Reserve Bank as the most influential financial policy maker in the world, and until we see a sustainable rebound in economic activity globally, it’s likely the venture capital space globally, but especially in Africa will continue to rebound slowly.
Tesla shareholders voted to reinstate Elon Musk’s $56 billion pay package. What does this mean?
Elon will own more of Tesla.
I’m a huge fan of this type of compensation package. As a startup grows founders sell off equity to raise capital. How great is it to have an opportunity to get those shares back as a founder? Nowadays the oversized pay of a CEO is being questioned more. This type of package that Tesla gave Elon forces the CEO to have measurable KPI’s to achieve and really highlights the CEO’s value and justifies his pay. All founder led companies should follow in these footsteps.
Other reading…
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