I have been speaking with our startups in Tekedia Capital and the message is clear: cut costs and do everything to successfully go through a severe dislocation which is brooding in the world. Even at Tekedia Institute, more and more learners are asking for payment plans. Analyzing data I am getting from dozens of companies, my conclusion is that we’re entering a challenging phase in the global economy.
If you run a business, now is the time to look at your cost elements. If you work as an employee, now is the time to feed the piggybank because many bad things can happen. Africa is going to be the hardest hit (after Ukraine of course) in the Russia-Ukraine war because the world sees the continent as “error” digits now.
The United States major challenge now is China, not even Russia: ‘“China is the only country with both the intent to reshape the international order and, increasingly, the economic, diplomatic, military and technological power to do it,” Secretary of State Antony Blinken said in a speech at George Washington University.’ The fear is clear: if China aligns with Russia, Europe will host two “unfriendly” countries in-house, within Europe. How do you sleep with that?
“We do not support Taiwan independence, and we expect cross-strait differences to be resolved by peaceful means,” he said. “Our policy has not changed. What has changed is Beijing’s growing coercion, like trying to cut off Taiwan’s relations with countries around the world and blocking it from participating in international organizations.”
Blinken acknowledged that the U.S. will have to compete with China on multiple fronts but took steps to avoid ratcheting up tensions between the countries.
“We will align our efforts with our network of allies and partners acting with a common purpose and common cause and harnessing these two key assets,” Blinken said. “We will compete with China to defend our interests and our vision for the future.”
And Russia understands that, and is asking the world to lift sanctions so that it can unlock the blockade for food exports via the Black Sea. The options are limited since no insurance company will cover any ship to go there without assurances from Russia. And the big one: a vanquished Russia with alignment with China is not a victory to celebrate because they will regroup in the future!
China is moving rapidly out of the West and it is troubling! They are building payment systems, testing potential impacts and effects of sanctions and using the Russia-imposed sanctions as test systems. A big unbundling of China with more integration with Russia will bring a massive global fragmentation which the head of the IMF lamented in the World Economic Forum this week.
So, as the world plays that game, few will remember Africa. In short, it is already forgotten. There are consequences which will follow and I want you to be prepared because the signs are evident. There are many reasons as I have noted.
- Russia Gas: Russia can withdraw from Ukraine and the next day cut-off gas supplies to the whole of Europe. If that happens, some EU countries will struggle. Countries like Germany and Hungary will be devastated and the implications may result in a global recession.
- US Economy: As the US central bank works to tame inflation, by increasing interest rates, easy money will go. Expect global funds to pause on investments in some emerging economies. As that happens, high interest rates will mean borrowing for nations like Nigeria will be more expensive.
- Political Risk: In all you do, have a model that Nigeria could experience turmoil. We were lucky in 2015 (Jonathan) and 2019 (both candidates are from the North); 2023 looks increasingly volatile.
- Naira Devaluation: I do not expect any official move before the election. But fighting to protect the Naira is largely non-existent. So, the paralysis in the black market will continue. N670/$ by May 2023 is a possibility.
- Global Hunger: from rising supply chain costs (fuel cost, Ukraine war, etc) to inability of farmers to go to farms due to insecurity, food security will become more challenging in Nigeria.
Cutting Cost
When I say ‘cut cost’, it does not mean stopping every investment. Rather, the message is to allocate capital more prudently, conserve cash and find ways to run lean. It also means a call to find a path to profitability even if it means sacrificing short-term growth. Because raising funds in H2 2022 will be tougher, you win by just surviving.
And for that to happen, you have to cut the party and that means reducing cash for marketing, projects, etc and pushing for a path for the best investors (the customers) to fund. The best investors are customers – and you must get them to believe in you now.
At Tekedia Startup Masterclass and Tekedia Town Hall, we will be focusing on these topics as we work together to navigate the wave.
- The tech sector has had a tumultuous year: The Nasdaq index is down 26% while Bitcoin has plummeted a whopping 36%. That trouble is now starting to translate into layoffs, with venture capital-backed firms being hit especially hard as investors abandon risky bets and seek immediate returns. So far this week, firms including fintech unicorns Bolt and Klarna and delivery startups Gorillas and Getir have announced workforce cuts. Tech giants such as Netflix and PayPal are also shedding jobs, while Uber, Lyft, Snap and Meta have slowed hiring.
- Snap’s stock plummeted 43% Tuesday — dropping below its initial public offering price — after the company cut its revenue and profit forecasts for the year. The Snapchat owner said it was struggling with inflation, higher borrowing costs and supply chain shortages, and would now slow hiring and spending. Snap’s troubles led investors to flee other firms that rely on digital ad revenues, which analysts said may have peaked. Meta’s stock fell 7.6%, Alphabet’s 5.1% and Twitter’s 5.2%.’
(LinkedIn News)
