The focus on gender balance as a strategic economic opportunity has risen around the world over the past two decades – now it is accompanying Africa’s rise. As research of the benefits of gender balance has steadily grown, companies and countries have pushed to balance boards and leadership teams. More recently, investors have added pressure on the issue. Large funds have declared they won’t invest in companies that don’t balance. Women-led venture funds have started to emerge, and just this week a women-led bank announced its opening in the US.
Yet in the developing world, where the financing gap is most stark, women-led investments are rare, and women on listed company boards still a tiny minority. But efforts pushing for progress are emerging and deserve visibility.
Back in 2002, as President of the European Professional Women’s Network (now PWNGlobal.net), I remember doing one of the first surveys of Women on Boards in Europe, in partnership with Egon Zehnder. These and other efforts led to the introduction of board quotas across the continent a few years later, and a substantial increase in board balance, now averaging 33% female/ 67% male across the Stoxx Europe 600 companies.
It is heartening to see this kind of effort and focus emerging in Africa with TBR Africa. The steps for change are all on the agenda: measure today’s reality, educate and prepare women, and educate and lobby companies and governments. They are getting the measure of the current situation by mapping and publishing the imbalances on listed Boards across the continent. Then working with a range of actors (development finance institutions, private equity investors and companies in and outside Africa) to accelerate the appointment of women on boards and build a growing pipeline of board-ready women. While also educating the business community on the power of balanced leadership.
Launched in 2016, TBR Africa now has a network of over 1500+ senior executive women from over 55 countries. Since 2018, they have placed more than 35 women on boards, and trained over 120 women through their board training programme, Open Doors, developed in partnership with the UK’s Institute of Directors. They recently got a £1.6 million injection from the UK’s CDC which should help reach their target of doubling the number of women on African Boards by 2028.
Women run 40% of Africa’s SMEs but receive only 1% of funding from VCs. “In 2021 so far, male single founders & all-male founding teams have raised 84% ($2.2bn+) of all funding raised by startups in Africa,” says Maxime Bayen, who runs Africa: The Big Deal website. This gaping chasm hurts the region’s future. The region could capitalise on having the highest rates of female entrepreneurship in the world if access to capital wasn’t such an obstacle to achieving full potential. An additional challenge is that much of the VC funding in Africa does end up with local founders. “A good chunk of the funding that goes to female-led startups in Africa (especially in Kenya) goes to non-local founders,” adds Bayen. There are only a handful of women-led investment initiatives in Africa’s formal financial markets – and are, for the moment, limited to the continent’s two biggest economies. South Africa has the Kenya Women Investment Company and the Women’s Investment Portfolio Holdings Limited while Nigeria has Alitheia and the Women Investors Fund.
In 2021 so far, male single founders & all-male founding teams have raised 84% ($2.2bn+) of all … [+]
Thebigdeal.gumroad.com, Max Cuvellier, Maxime Bayen, Crescence Elodie Nonga
In Francophone West Africa, informal savings and credit groups called ‘tontines’ are commonplace. Some estimates suggest over 80% of the adult female population are members in urban areas, with amounts loaned ranging from a few dollars to thousands. But these systems don’t lead to scale and limit women’s potential economic impact. 44% of women entrepreneurs in Senegal, for example, finance their businesses by borrowing money from relatives. Only 3.5% of Senegalese women entrepreneurs borrow from banks and micro-finance institutions. The Covid crisis has hit Africa’s women-led, informal-economy businesses hard as investors prioritise existing relationships. Even government-led relief measures often have not reached them. Resilience depends on women having easy access to capital and business support. That’s what moved a group of West African women to create a fund by women for women.
WIC Capital is the first fund dedicated to women-led businesses in West Africa. It aims to connect female entrepreneurs to modern financial instruments, promote women’s leadership and skills (through its WIC Academy), and position women as full economic players rather than spectators. Led by Thiaba Camara Sy, the founder of Deloitte Senegal, WIC Senegal brings together 90+ women who invested over US$1m of their own money and raised over US$1m in grants from local and international partners. This has been invested in the Regional Stock Exchange (BRVM) and is being distributed to local entrepreneurs.
The thirst for better tools and education about financing – especially for women – is widespread. The United Nations Economic Commission for Africa (UNECA) and the African Institute for Economic Development and Planning (IDEP) has responded with a dedicated training program for African Women Investors. to build a pipeline of women investment leaders in Africa.
Even in the US, less than 5% of VC partners are female. But over the past five years, the number of women-led funds has multiplied by four. This has led to a surge in female entrepreneurship (73% of women-led firms were founded in the last five years).
The research shows not only that large companies with better gender balance in leadership outperform, so do companies founded by female entrepreneurs. Imagine when more funds, more investors and more governments get their strategies and their money aligned with the data. It’s starting, but there is a long way to go.
Africa, with its exceptionally entrepreneurial women and its huge gender gap in corporate business, has the most to gain from closing the gap. The region’s enormous potential has been hard hit by the Covid crisis. Investing in the continent’s women is a sure fire accelerator to recovery, and beyond.
Canadian investors might come across a lot of arguments out there for or against index funds and stocks. When it comes to investing, some might believe clicking once and getting an entire index is the way to go. Others might believe that stocks provide far more growth.
So let’s settle it once and for all. Which is the better investment: index funds or stocks?
Index funds can be considered a great investment for a number of reasons. These funds typically track a broad market index, such as the S&P 500. By investing in them you gain exposure to a diverse range of assets within that index, and that helps to spread out your risk.
These funds also tend to have lower expense ratios compared to an actively managed fund. They merely passively track an index rather than a team of analysts constantly changing the fund’s mix of investments. This means lower expenses, and lower fees for investors.
Funds also tend to have more consistent returns compared to individual stocks, which can see significant fluctuations in value. You therefore may enjoy an overall market trending upwards over the long term. This long-term focus can then benefit investors from the power of compounding returns, growing wealth significantly over time.
That doesn’t mean that stocks can’t be a great investment as well. Stocks have historically provided higher returns compared to other asset classes over the long run. When you invest in stocks, you’re buying ownership of stakes in a company. This ownership then entitles you to a share of the company’s profits through returns or dividends.
Investing in a diverse range of stocks can then help spread out risk. Whereas an index fund is making the choice for you, Canadian investors can choose the stocks they invest in, creating the perfect diversified portfolio for them.
What’s more, stocks are quite liquid. This means you can buy and sell them easily on the stock market, providing you with cash whenever you need it. What’s more, this can be helpful during periods of volatility in the economy, providing a hedge against inflation and the ability to sell to make up income.
In some jurisdictions as well, even if you lose out on stocks you can apply capital losses, reducing overall tax liability in the process. And while it can be challenging, capital gains can also allow you to even beat the market!
I’m sure some people won’t like this answer, but investing in both is definitely the best route to take. If you’re set in your ways, that can mean you’re losing out on the potential returns which you could achieve by investing in both of these investment strategies.
A great option that would provide diversification is to invest in strong Canadian companies, while also investing in diversified, global index funds. For instance, consider the Vanguard FTSE Global All Cap Ex Canada Index ETF Unit (TSX:VXC), which provides investors with a mix of global equities, all with different market caps. This provides you with a diversified range of investments that over time have seen immense growth.
This index does not invest in Canada, so you can then couple that with Canadian investments. Think of the most boring areas of the market, and these can provide the safest investments! For instance, we always need utilities. So investing in a company such as Hydro One (TSX:H) can provide long-term growth. What’s more, it’s a younger stock compared to its utility peers, providing a longer runway for growth. And with a 3.15% dividend yield, you can gain extra passive income as well.
Former chief executive officer of RBC Dominion Securities Tony Fell is campaigning to require the Canadian financial industry to account for inflation in how it reports investment returns.Neville Elder/Handout
While the average Canadian is fixated on the price of gasoline and groceries, inflation may be quietly killing their investment returns.
Compounded across many years, even modest inflation can deal a powerful blow to a standard investment portfolio. And investors commonly underappreciate the threat.
But a legend of the Canadian investment banking industry is trying to change that.
Tony Fell, the former chief executive officer of RBC Dominion Securities, is campaigning to require the Canadian financial industry to account for inflation in how it reports investment returns.
“I think they will find this very hard to argue against,” he said in an interview. “It’s a matter of transparency and reporting integrity. But that doesn’t mean it will happen.”
Mr. Fell made his case in a recent letter to the Ontario Securities Commission, arguing that Canadian investors are being misled. He has not yet received a response from the regulator.
Canadians with an investment account receive a statement at least once a year detailing how their investments have performed. For the most part, rates of return are calculated on a nominal basis, meaning they have no inflation component factored in.
A real return, on the other hand, accounts for the hit to purchasing power from rising consumer prices.
These figures, Mr. Fell argues, would give investors a clearer picture of how much they have gained from a given investment.
And since Statistics Canada calculates inflation on a monthly basis, the investment industry would already have access to the data it needs to make the switch to real returns. It would be very little trouble and no extra cost, Mr. Fell said.
Still, he said he expects the investment industry will resist his proposal. “The mutual-fund lobby is so strong, and nobody wants to rock the boat too much.”
He points to the battle to inform Canadians of the investment fees they pay. For 30 years, investor advocates have been pushing for improvements to disclosure.
One major set of regulatory changes, which took effect in 2016, required financial companies to disclose how much clients paid for financial advice.
But the reforms left out one major component of mutual-fund fees. The cost of advice is there, but many investors still don’t see how much they pay in fund-management fees, which amount to billions of dollars paid by Canadians each year.
Total cost reporting, which should finally close the fee-disclosure gap, is set to come into effect in 2026. “It’s outrageous,” Mr. Fell said. “That should have been done years ago.”
So, it’s hard to imagine the industry warmly receiving his proposal, or the regulators enthusiastically pushing for its consideration.
The OSC said it agrees that retail investors need to be attuned to the effects of inflation, which is where investment advisers come in. “Professional advice requires an assessment of risk tolerance and risk appetite in order for an adviser to know their client, including the effect of the cost of living on achieving their financial objectives,” OSC spokesman Andy McNair-West said in an e-mail.
And yet, Mr. Fell said, the need exists for more formal reporting of inflation-adjusted performance.
Inflation often goes overlooked by the industry and investors alike. It can be seen in the celebration of stock indexes at all-time nominal highs, which wouldn’t look so great if inflation were factored in.
The inflationary extremes of the 1970s provide a stark illustration. In 1979, the S&P 500 index posted a total return of 18.5 per cent – a blockbuster year until you consider that inflation was 13.3 per cent.
That took the index’s real return down to a lacklustre 5.2 per cent.
More recently, investors in Canada and the United States piled into savings instruments promising 5-per-cent nominal rates of return. But the rate of inflation in Canada averaged 6.8 per cent in 2022, more than wiping out the return on things such as guaranteed investment certificates, in most cases.
“A lot of people don’t connect those dots,” said Dan Hallett, head of research at HighView Financial Group. “Over 10 years, even 2-per-cent inflation really eats away at purchasing power.”
He worries, however, that reporting after-inflation returns may confuse average investors, many of whom still fail to understand the basic investment fees they’re paying.
All the more reason to get Canadian investors thinking more about inflation, Mr. Fell argues.
“The impact of inflation on investing is sort of forgotten about,” he said. “The only way I can think of turning that around is to highlight it in investors’ statements.”
Capital gains tax hike a sure way to repel the tech sector
Published Apr 18, 2024 • Last updated 23 minutes ago • 4 minute read
If there’s an uncomfortable economic lesson of the past few years, it’s this: The vibes matter.
As much as economists point to data, the reality in politics and policy is that public expectations and perceptions are important too. And from a business perspective, the vibes of the 2024 federal budget are rancid.
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The budget document’s title is “Fairness For Every Generation” and in practice, what that meant was a “soak the rich” tax hike on capital gains.
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You can see how this looked like good politics. In her budget speech, Finance Minister Chrystia Freeland said that only 0.13 per cent of Canadians with an average annual income of $1.4 million will pay higher taxes — hardly a sympathetic lot, at a time when many Canadians are struggling to pay for food and housing.
The problem is that the proposed capital gains tax hike won’t only soak a handful of rich Canadians as advertised. In its current design, it broadly punishes individuals and families of small business owners, tech entrepreneurs, dentists and countless others who have often spent decades trying to build their businesses for a potential once-in-a-lifetime capital gains event. Together, our analysis suggests that those people represent closer to 20 per cent of Canadians.
This tax proposal simply amounts to a systemic tapping on the brakes on the investment in a productive and prosperous future, being made by innovative, hardworking Canadians. And it does so at the very time Canada needs them to accelerate their investing.
But among the innovators and business leaders I talk to in the Canadian tech sector, this week’s budget was a chilling shock. There is a sincere and widespread belief that if something does not change, the budget will do widespread and irreparable damage to Canada’s tech sector.
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That’s why more than 1,000 CEOs have signed a public letter to Prime Minister Trudeau and Deputy Prime Minister Freeland at ProsperityForEveryGeneration.ca, calling on the government to stop this tax hike. Innovators understand what’s at stake.
Firstly, we are at a moment when capital is harder to access than at any time in the past generation. Higher interest rates and economic uncertainty mean that many high-growth companies with innovative products struggle to secure growth capital on favourable terms.
South of the border, we’re seeing strong growth, driven by significant government investment through strong industrial policy, alongside significant growth in bleeding-edge artificial intelligence applications. The U.S. is an exciting place to invest right now.
And capital is highly mobile. If Canada is seen as an unfriendly place to invest, due to high taxes, investors will simply take their money elsewhere, and propel the growth of promising tech companies in other countries.
What’s more, highly skilled talent is more mobile than ever before, and among innovative high-growth companies, stock options — subject to capital gains tax — are a key form of compensation.
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We’re not talking purely about CEOs and tech founders here either. The dedicated early players of a promising tech startup earn their stock options with sweat equity. Their dedication, taking a risk in the prime of their career, is often the key ingredient for the success of future innovation champions.
Innovators are intimately aware of these concerns, because this isn’t the first time the Liberal government has tried to tax stock options. Nearly a decade ago, they promised to hike taxes on stock options in their 2015 campaign platform, and it took years of public advocacy from tech leaders to help the government understand the potential unintended damage that a reckless tax hike could do on the ability to attract and retain talent.
All along the way, we were assured by the government that they knew what they were doing, and there was nothing to worry about. In truth, after many frank conversations, they changed course.
In the days and weeks ahead, I’m expecting to hear the same kind of thing again. Already we’ve heard from government officials pointing to the “Canadian Entrepreneurs’ Incentive” carve-out, which will soften the blow of higher capital gains tax rates overall. The details of this carve-out are not yet fully clear, and it’s possible that the government will tinker with the thresholds to help mitigate the damage of a tax hike on capital gains.
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But the reality is that without a significant change in messaging, the danger to Canada’s economy is real.
Capital gains are taxed at a different rate because they are taxes on investment. Every investment comes with risk; you are not guaranteed to make a profit. The tax code takes this into account.
If the vibes are off, and the global perception of Canada is that we’re not a place where the investment risk is worth it, because the federal government is just going to tax you to death, then we simply won’t see capital or talent flow to Canada.
Innovation and entrepreneurship are about hope. You fundamentally need to be an optimist to risk it all, and invest yourself in growing a business. Right now, Canada’s federal government is not sending a hopeful vibe. And the vibes matter.
Benjamin Bergen is president, Council of Canadian Innovators.
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