US interest rate cut could see funding taps turn on for GCC startups

US interest rate cut could see funding taps turn on for GCC startups
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Updated 01 October 2024
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US interest rate cut could see funding taps turn on for GCC startups

US interest rate cut could see funding taps turn on for GCC startups

RIYADH: After almost two years of rate hikes, the US Federal Reserve has slashed interest rates by half a percentage point to a range of 4.75-5 percent, but what does this mean for the startup and venture capital ecosystem? 

The relationship between the US Federal Reserve and the global startup ecosystem is somewhat complicated. 

Washington’s decisions on interest rates significantly influence the availability and cost of capital, which are crucial factors for startups and venture capital firms. 

Lower interest rates generally make borrowing cheaper, potentially encouraging more investment into riskier asset classes, including startups. 

Gulf Cooperation Council central banks followed suit in rate cuts, as their currencies are pegged to the US dollar. 

Venture data analyst and founder of MAGNiTT, Philip Bahoshy, shares a nuanced perspective on the potential impact of rate cuts on the global and regional startup ecosystem. 

In an interview with Arab News, Bahoshy said that the cut itself may not be the most significant, but rather, the potential trend expected to take place. 

“To answer what impact will the cut have on VC investment, you need to understand why the Fed has taken this decision,” Bahoshy said.

“Ultimately, Jerome Powell (chair of the US Federal Reserve) says that the aim is to bring down or keep inflation steady while keeping moderate to low unemployment in the US,” he added. 

“The signs are that we are trying to avoid a recession and/or an economic downturn in the US and that things are healthy, and therefore bringing down interest rates can help stimulate disposable income and people’s consumption,” the analyst said. 

This, in turn, brings down the cost of capital, also known as the borrowing cost, which in turn makes VC a more attractive investment. 

On the flip side, when interest rates are high, the implication of putting money in the bank or investing in less riskier options like real estate becomes the go-to for investors. 

If an investor is earning 6 percent on a savings account, knowing that their money is secure, there’s little incentive to take on the uncertainty of investing in a startup, not knowing when or if they’ll get their money. 

On the lending side, lower interest rates also make borrowing cheaper for startups. 

Entrepreneurs, who are often very focused on maximizing every dollar, will appreciate the ability to borrow at lower costs which enables them to allocate more resources toward growing their businesses, rather than paying high interest costs.

Bahoshy has mentioned in previous reports that the decline in venture capital funding in the Middle East and North Africa region in the last couple of years has been, though not solely, due to high interest rates. 




Venture data analyst and founder of MAGNiTT, Philip Bahoshy. Supplied

The MENA region saw a 34 percent year-on-year drop in funding in the first half of the year, compared to the same period last year. 

In 2023, VC investments declined by 23 percent on an annual basis. 

Interest rates and venture stakes 

Bahoshy explained that the Fed’s last cut will not immediately impact VC investments, but the implication of continued rate reductions will. 

“We anticipate that this will create a lower cost of capital for late-stage investors, more willingness for people to invest in other asset classes because fixed deposits become less attractive and, therefore, more investments going into venture in general,” Bahoshy said.  

“My view is that the immediate impact will be somewhat limited. However, heading into 2025, if we continue to see rate cuts in the US, it will likely stimulate venture capital investments globally and in turn likely to return investor appetite for venture capital in the region. However, that’s likely not to impact Q4, more likely to impact 2025 positively,” he added. 

Echoing Bahoshy’s prediction, Tushar Singhvi, deputy CEO of Crescent Enterprises and head of the firm's venture capital platform CE-Ventures, feels positive that more cuts are underway.

Speaking to Arab News, Singhvi said: “The Fed rate cut sets the trend for a series of rate cuts expected over the next few quarters – this will result in higher liquidity in general, and the venture asset class will also benefit from higher liquidity.” 

Short-term projections 

Bahoshy pointed out that there have already been signs of growth in the VC landscape in the US in the first half of the year, which will probably be reflected in the MENA region. 

“We noted back in the H1 report that in the US, we believe that we were reaching an inflection point and that we saw for the first time two consecutive quarters of growth in venture capital deployment,” he said. 

“I anticipate that Q3 will continue to be higher globally and within the region, which is what the trends show and this rate cut will continue to support a potentially higher Q4 globally than Q3,” he added. 

Bahoshy tempers his predictions, stating that the increase will be “moderate”, and not reaching 2021-2022 levels. 

When it comes to startup strategies, the rate cut should hardly affect valuations or funding strategies, Singhvi said. 

“Startups should continue to be as capital efficient as possible and focus on growth and profitability – and their funding strategies should be devised around that,” he added. 

VC’s will most likely maintain their plan of action. Singhvi stated that the rate cut will not immediately change the focus areas of VCs in the region. 

“VCs will continue to pursue startups which are building transformational businesses within high growth sectors and leveraging technology to build innovative and sustainable businesses,” he added. 

Bahoshy also feels the same way. “I don’t think that a change in interest rates is going to impact sectorial shifts,” he said. 

He highlighted that an even bigger concern exists within the startup ecosystem across the Middle East and North Africa. 

“The biggest challenge for the region remains exits, liquidity and return on investments back to investors, which means that they have shown the success of their investment strategy and paid off their LPs (limited partners), increases risk appetite to raise new funds and to go into less traditional sectors,” Bahoshy said. 

Singhvi adds that the increase of liquidity due to reduced rate cuts over time will definitely fuel exits in the region. 

“There will be a positive impact of the rate cuts over time on exit strategies for VC backed companies as M&A (mergers and acquisition) activity will pick up and tech IPOs (initial public offerings) will also gain more momentum due to higher liquidity,” he added. 




Tushar Singhvi, deputy CEO of Crescent Enterprises and head of the firm's venture capital platform CE-Ventures. Supplied

The geographical impact 

When asked about whether the anticipated investment growth will be across the entire MENA region, Bahoshy said that the effects of the rate cuts might be more regionally dispersed rather than concentrated in key markets like Saudi Arabia and the UAE. 

“When you look at the sovereign entities, whether it be Saudi Arabia, UAE, and Qatar, what’s more interesting to track is how does interest rate impact oil prices or natural assets that have been beneficial to the sovereign entities,” Bahoshy said. 

He questioned whether this would “stimulate oil prices to increase because consumption has increased, or will this lead to a further reduction in the oil prices which have been a big stimulus to investment and wider growth of the economy and venture capital.” 

Bahoshy added: “I don’t think that has necessarily a geographical specific impetus here in the region. In fact, many of the economies like the UAE and Saudi Arabia have performed better as a result of government focus and their ability to deploy capital during a time where other geographies haven’t.” 

He went on to say that while the interest rate cut may be beneficial, there was a question over how it will impact oil and natural resource prices. 

Late-stage startups, get ready 

In the first half of the year, early-stage investments were the primary focus, with almost 75 percent of deals flowing in that direction.

Bahoshy explained that this trend could start to change in the next 12 months if interest rates continue to go down. 

“However, I don’t think that this specific rate cut is going to stimulate that, but if we continue to see rate cuts to year end and into H1 2025, we may see a return of later stage investment while it’s healthy for early-stage investment to continue to grow,” he said.


Closing Bell: Saudi main index slips to close at 12,103

Closing Bell: Saudi main index slips to close at 12,103
Updated 34 sec ago
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Closing Bell: Saudi main index slips to close at 12,103

Closing Bell: Saudi main index slips to close at 12,103
  • Parallel market Nomu lost 10.85 points, or 0.07%, to close at 29,248.15
  • MSCI Tadawul Index lost 3.03 points, or 0.20%, to close at 1,518.76

RIYADH: Saudi Arabia’s Tadawul All Share Index slipped on Sunday, losing 27.67 points, or 0.23 percent, to close at 12,103.16. 

The total trading turnover of the benchmark index was SR6.09 billion ($1.62 billion), as 82 of the stocks advanced and 144 retreated. 

The Kingdom’s parallel market Nomu also lost 10.85 points, or 0.07 percent, to close at 29,248.15. This comes as 47 of the listed stocks advanced, while 31 retreated. 

The MSCI Tadawul Index lost 3.03 points, or 0.20 percent, to close at 1,518.76. 

The best-performing stock of the day was Riyadh Cement Co., whose share price surged 9.88 percent to SR32.80. 

Other top performers were Saudi Industrial Export Co. and Miahona Co., whose share prices rose by 9.76 percent and 5.81 percent to SR2.70 and SR30.95, respectively. 

The worst performer was Al-Babtain Power and Telecommunication Co., whose share price dropped 8 percent to SR39.65. 

Al-Jouf Agricultural Development Co. and Shatirah House Restaurant Co. were among the worst performers, with their share prices falling by 7.67 percent and 7.11 percent to SR62.60 and SR19.60, respectively.

On the announcements front, Al-Jouf Cement Co. released its interim consolidated financial results for the period ending Sept. 30.

According to a statement on Tadawul, the company reported a net profit of SR30 million for the first nine months of the year, marking a 30.8 percent decline compared to the same period in 2023. 

The decrease is primarily attributed to lower export sales, higher heavy fuel oil prices, and an increase in administrative expenses due to the rescheduling of credit facilities. 

Al-Jouf Cement Co. ended the session at SR10.16, down 1.38 percent. 

MBC Group Co. also announced its interim financial results for the period ending Sept. 30. A bourse filing revealed that the company recorded a net profit of SR250 million for the first nine months of the year, reflecting a 36,686 percent increase compared to the same period in 2023. 

The surge is primarily because the previous year’s results only covered the period from July to September 2023 — following the acquisition of subsidiaries — while the 2024 results account for the full nine months. 

MBC Group Co. ended the session at SR46.80, down 1.07 percent. 

Arabian Centers Co., or Cenomi Centers, reported a net profit of SR867.6 million for the first nine months of 2024, a 14.83 percent decline compared to the same period in 2023, according to a Tadawul statement. 

The drop was mainly due to higher net finance costs, increased impairment losses on receivables, and a rise in revenue and investment property gains. However, advertising, promotional, general, administrative, and other operating expenses all decreased. 

The company closed at SR21.44, down 2.17 percent. 

Fawaz Abdulaziz Alhokair Co. reported a net loss of SR48.3 million for the first nine months of the year, a 45.7 percent decline compared to the same period in 2023, according to a bourse filing. 

The loss was mainly due to a decline in gross margin, though offset by lower selling, general, and administrative expenses, higher other operating income, and reduced net finance expenses. 

The company closed at SR13.18, up 0.47 percent. 

Saudi National Bank has launched the offering of its SR-denominated Additional Tier 1 Sukuk, with a minimum subscription of SR1 million.

According to a Tadawul statement, the Sukuk’s amount and terms will be determined based on market conditions. SNB Capital Co. has been appointed as the sole lead manager, bookrunner, and lead arranger. 

The bank closed at SR33.00, up 0.92 percent. 


Saudi Arabia to boost military sector, partnerships at Airshow China 2024

Saudi Arabia to boost military sector, partnerships at Airshow China 2024
Updated 20 min 53 sec ago
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Saudi Arabia to boost military sector, partnerships at Airshow China 2024

Saudi Arabia to boost military sector, partnerships at Airshow China 2024
  • Saudi Pavilion will feature various government entities and national companies specializing in the military industry sector,
  • It will showcase a range of military products and equipment, particularly in aviation

JEDDAH: Saudi Arabia will participate in the 2024 China Aviation and Aerospace Exhibition in Zhuhai, aiming to foster partnerships and further develop its military sector.

The General Authority for Military Industries is coordinating the Saudi pavilion’s participation in the global event scheduled for Nov. 12 to 17.

The display area will feature various government entities and national companies specializing in the military industry sector, offering a valuable opportunity to explore the latest advancements in technologies and equipment within the field.

The Kingdom’s defense sector is projected to make a significant contribution to the national economy by 2030, with an expected gross domestic product contribution of $17 billion and a direct addition of $9 billion to non-oil revenues. The division’s growth is set to create 100,000 direct and indirect job opportunities by the end of the decade.

Some 74 investment opportunities are emerging from efforts to develop and localize supply chains, with an estimated value of SR150 billion ($40 billion). The total investment contribution from the defense sector is expected to reach $10 billion by 2030, according to the GAMI website.

Saudi Arabia’s participation in international events marks a crucial step in solidifying the Kingdom’s position as one of the fastest-growing economies among the G20 nations, said a statement by GAMI.

The initiative also emphasizes the country’s commitment to attracting global investors and advancing the objectives of Saudi Vision 2030 within the military sector.

The Kingdom’s pavilion will showcase a range of military products and equipment, particularly in aviation, underscoring the nation’s efforts to enhance national military manufacturing capabilities. By 2030, Saudi Arabia aims to localize over 50 percent of government spending on military equipment and services.

The pavilion will also highlight the sector’s investment potential and the favorable environment for investments in the counttry’s defense and military industries.

Established in 2017, GAMI collaborates with government entities and private sector partners to empower national and international firms within the military industry. This initiative aims to localize and enhance domestic manufacturing capabilities, positioning the sector as a key contributor to Saudi Arabia’s economic prosperity and defense independence.

Several government bodies, including the Ministry of Investment and the General Authority for Defense Development, are participating in the Saudi pavilion at the exhibition, alongside companies such as the National Co. for Mechanical Systems, WAKEB Co. for Artificial Intelligence and Autonomous Systems, Milestone Aviation Services, and Homat Al-Watan Co, said the statement.

GAMI’s efforts, in partnership with the public and private sectors, support the growth of the national economy by establishing policies and regulations that create a good investment environment.

The sector is now more accessible to investors due to its market size, cross-sector impact, competitive advantages, and GAMI’s focus on developing industrial participation programs and policies.


Saudi Arabia’s flyadeal boosts Dammam network with 3 domestic routes

Saudi Arabia’s flyadeal boosts Dammam network with 3 domestic routes
Updated 10 November 2024
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Saudi Arabia’s flyadeal boosts Dammam network with 3 domestic routes

Saudi Arabia’s flyadeal boosts Dammam network with 3 domestic routes
  • The new destinations, Najran, Tabuk, and Yanbu, are strategically significant
  • Expansion marks the first phase of flyadeal’s 2025 growth plan

RIYADH: Saudi Arabia’s low-cost airline, flyadeal, will launch three new domestic routes from Dammam starting in January, aligning with the Kingdom’s Vision 2030 objectives. 

The airline will launch daily flights from Dammam to Najran and four weekly services to Tabuk on Jan. 1, followed by three weekly flights to Yanbu starting Jan. 2.

The announcement was made by Steven Greenway, CEO of flyadeal, on the sidelines of the World Travel Market in London.

Greenway said the new routes are part of flyadeal’s mission to connect smaller towns and cities across the Kingdom, catering to populations under 400,000 that are underserved yet have a growing demand for air travel.

“Having well-established bases in Riyadh and Jeddah, flyadeal is now strengthening its presence in the Eastern Province by increasing frequencies on existing routes and adding three new destinations connected to Dammam,” Greenway said.

He added: “Our new flights will facilitate travel for business and leisure purposes, support the growing desire among Saudis and international visitors to discover the rich diversity that the country offers, and attract a growing expatriate population to explore the Kingdom.”

The expansion complements Vision 2030, which seeks to diversify Saudi Arabia’s economy and transform the Kingdom into a global transportation and logistics hub.

By enhancing access to remote and economically vital cities, flyadeal supports Vision 2030 objectives to strengthen tourism, stimulate business opportunities, and increase domestic mobility.

The new routes will also advance the nation’s strategy to welcome 150 million visitors annually by 2030.

The expansion marks the first phase of flyadeal’s 2025 growth plan, which includes adding more domestic routes and launching international flights from its primary hubs in Riyadh, Jeddah, and Dammam in the coming months.

The developments align with Saudi Arabia’s broad national efforts to establish itself as a key player in the aviation sector, with enhanced infrastructure, expanded air service networks, and a focus on customer experience.

Operating from its three main bases, Riyadh, Jeddah, and Dammam, flyadeal serves nearly 30 year-round and seasonal destinations across the Kingdom and select cities in the Middle East, Europe, and North Africa.

The airline’s fleet comprises 36 modern Airbus A320 narrowbody aircraft, optimized for efficiency and passenger comfort, reinforcing Saudi Arabia’s commitment to advancing sustainable and high-quality air travel.

The new destinations, Najran, Tabuk, and Yanbu, are strategically significant. Najran, an agricultural hub in the southwest, contributes substantially to the local economy.

Tabuk serves as a gateway to the Red Sea coast and plays a pivotal role in the Kingdom’s large-scale tourism and development projects.

Yanbu, Saudi Arabia’s second-largest port in the Madinah province, is a hub for petroleum and petrochemical industries, supporting national economic objectives and Vision 2030’s goals for diversified growth.

With international routes to Amman, Cairo, and Istanbul, flyadeal positions itself as a crucial connector between the Kingdom and key regional and international destinations, advancing Vision 2030’s ambition of creating an integrated, globally connected Saudi Arabia.


National climate commitments: a reality check since Paris

National climate commitments: a reality check since Paris
Updated 10 November 2024
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National climate commitments: a reality check since Paris

National climate commitments: a reality check since Paris
  • Current pledges fall short of avoiding disaster
  • Financial support must be tangible, says UNFCCC chief

BAKU: As COP29 convenes in Baku, global attention turns once again to the question of climate commitments and progress made since the landmark 2015 Paris Agreement.

The upcoming conference will pose a pressing question: Has the world truly advanced in meeting the emissions targets that science says are essential to avoid catastrophic climate change?

A close examination of the current Nationally Determined Contributions shows both progress and an urgent need for more ambitious action.

Enhancing accountability and transparency

For many nations, the Paris Agreement remains a guiding framework, but as the UN’s first global stocktake at COP28 demonstrated, current commitments and transparency mechanisms are insufficient for real progress.

COP29 aims to improve accountability measures to ensure that pledged funds are disbursed effectively and on schedule. 

Transparency mechanisms such as regular reporting on climate finance allocations and emissions reduction progress are being considered to enhance trust and accountability in international climate cooperation.

Simon Stiell, executive secretary of the UN Framework Convention on Climate Change, highlighted the importance of tracking mechanisms to ensure that “climate cash counts,” emphasizing that financial support must translate into tangible, measurable results.

Stagnation in reducing global emissions

Since the Paris Agreement’s adoption, NDCs have become the primary framework for countries to articulate their climate ambitions, but recent data shows that the majority fall short of meeting the global temperature goal.

According to the latest report from the UN Climate Change Secretariat, global greenhouse gas emissions remain perilously close to 2019 levels, with minimal reduction progress.

Even with full implementation of all current NDCs, emissions are projected to peak before 2030 but fall short of the reductions needed to keep global warming below the critical threshold of 1.5°C above pre-industrial levels.

This gap illustrates an alarming trend — while commitments have increased in number and specificity, their collective impact remains insufficient to prevent severe climate impacts.

In particular, countries with historically high emissions — including the US, China, and India — have struggled to translate ambitious pledges into sustained reductions.

On the other hand, nations such as those in the EU, New Zealand, and several Pacific Island states have either reduced emissions substantially or put policies in place that could serve as models for more comprehensive global action.

Germany is another example of a country which has pioneered renewable energy legislation to achieve a record 46 percent share of renewable power in its electricity mix in recent years.

Meanwhile, Denmark and Sweden have established national frameworks targeting net-zero emissions by the middle of the century. Yet, many of the world’s largest emitters remain behind their targets, underscoring a divide between ambition and action that is critical for COP29 to address.

Climate-vulnerable regions, including sub-Saharan Africa and island nations, have also made considerable strides in setting strong climate policies despite contributing relatively little to global emissions. However, these nations often face implementation barriers that more affluent countries do not, primarily due to resource limitations.

Financial commitments fall short of needs

Climate finance has emerged as a critical factor in closing the emissions gap, especially for developing countries facing disproportionate impacts from climate change. Climate-related damages have skyrocketed in recent years, with extreme weather events causing billions in economic losses worldwide.

Stiell underscored this point by stressing the need for exponential growth in climate finance to ensure equitable transitions across economies.

“We simply can’t afford a world of clean energy haves and have-nots,” he said, warning that without substantive financing commitments only the wealthiest nations would be able to protect themselves against the intensifying climate crisis.

Yalchin Rafiyev, Azerbaijan’s lead negotiator, reinforced this: “We can see the divides that need to be bridged, but we must have a climate finance target that accounts for the needs of the most vulnerable.”

While the latest OECD data indicates developed countries mobilized $100 billion for climate action in 2022, this figure falls drastically short of the trillions of dollars needed annually.

However, the World Bank and the International Monetary Fund face mounting calls to further expand these initiatives and reduce financing barriers for developing nations.

As COP29 unfolds, global leaders face the challenging task of ensuring that the commitments made are not just promises but foundational steps toward meaningful, global climate action. The stakes have never been higher.


COP29 set to begin with hopes for more funding to fight climate change

COP29 set to begin with hopes for more funding to fight climate change
Updated 10 November 2024
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COP29 set to begin with hopes for more funding to fight climate change

COP29 set to begin with hopes for more funding to fight climate change
  • Just, equitable action vital, says COP29’s Mukhtar Babayev

BAKU: The highly anticipated COP29 UN climate change conference opens on Monday in Baku, Azerbaijan, bringing together world leaders, experts, and activists to tackle the urgent environmental challenges facing the planet.

Running through Nov. 22, this year’s event is centered around the theme “In Solidarity for a Green World.”

With over 50,000 participants expected, including top industry leaders and policymakers, COP29 aims to drive global climate action. However, several key leaders — EU President Ursula von der Leyen, US President Joe Biden, and Brazil’s President Luiz Inacio Lula da Silva—will be notably absent, according to Reuters.

COP29 has a special focus on climate finance, as parties aim to set a New Collective Quantified Goal on funding. 

Expectations are high as delegates prepare to discuss topics including carbon emissions reduction, sustainable development, and the integration of climate resilience into national policies. 

Azerbaijan is a significant producer of fossil fuels, just as last year’s host the UAE, but COP29 President-Designate Mukhtar Babayev told Arab News recently that hosting the conference is a sign of change.

“Like Saudi Arabia, Azerbaijan has historically been a significant energy producer, particularly in oil and gas. Hosting COP29 signifies our shift from traditional energy sources to embracing renewable energy solutions,” he said. 

“This event will allow us to showcase our ongoing efforts to diversify our energy mix, investing heavily in wind, solar, and hydrogen energy projects,” he added. 

The conference aims to deliver support for urgent action and foster a sense of shared responsibility between international organizations. 

Babayev highlighted Azerbaijan’s role in coordinating global efforts. “We hope that COP29 in Azerbaijan will serve as a platform for developing nations to voice their unique climate challenges and solutions.

“As a country that has faced environmental and economic transformation, Azerbaijan understands the delicate balance between development needs and climate responsibility,” he said. 

He added: “We can facilitate inclusive dialogues between the Global South and developed nations to ensure that climate action is equitable and just.” 

Commenting on the country’s preparations for the influx of visitors, Babayev said: “In terms of logistics and to ensure Baku is ready to host thousands of delegates from across the globe, we have been investing in the city’s infrastructure, with a strong emphasis on sustainability.” 

Moreover, investments are being made in expanding green public transportation options, enhancing conference facilities, and optimizing urban mobility to minimize environmental impact during the event, he stated.

“Additionally, we are committed to achieving a green COP by integrating renewable energy into the event’s operations and aiming for a zero-waste policy throughout the conference,” said Babayev. 

Some of its established environmental protection initiatives, according to Babayev, include reforesting degraded areas and protecting the Caspian Sea. 

“COP29 will spotlight these initiatives and encourage international collaboration to replicate them.” 

Although the path ahead is challenging, COP29 represents a crucial opportunity to turn ambition into tangible results for generations to come. 

“We are prepared to lead, innovate, and foster the international cooperation needed to tackle the climate crisis and build a more sustainable future for all,” said Babayev.