The Budget has Landed, Cdn Canola vs China, and Venture Capital
We read the Budget* – So you don’t have to
On Tuesday, Finance Minister Bill Morneau presented the Federal Budget for 2019: “Investing in the Middle Class”. The budget is projected at $22.8 billion over the next five fiscal years, contributing to what the Feds predict will be a $19.8 billion deficit for 2019-2020.
What does this size of deficit mean fro Canada? According to RBC Economic’s analysis of the budget, “Those deficits are just small enough to push debt-to-GDP slightly lower in the near term. But a softening economic outlook for 2019 leaves little room for error. Persistent deficits also mean less fiscal flexibility should the economic outlook deteriorate more significantly. “
The proposed budget would go into effect Fall of 2019 (after the upcoming election) – giving ‘food for thought’ moving to the polls, especially for anyone the proposed budget is (or isn’t) designed for. Here are some key highlights of what’s on offer, and for who:
- Housing: In addition to increasing the tax-free RRSP withdrawal limit for a down-payment as mentioned last week, the budget proposes $1.25 billion to fund a First-Time Home Buyer Incentive program, a shared-equity mortgage program to lower the cost of homeownership for a key group: millennial. For first-time home buyers with household incomes lower than $120,000 per year, the incentive would provide 5-10% of the purchase price of a home, to be paid back by the buyer to the government once the mortgage is paid off. In larger cities like Toronto or Vancouver where homes often exceed $500,000 in price, it’s unclear whether many young people would be eligible, or benefitted, by the incentive.2. Education: A Canada Training Benefit of $250 a year for skills upgrading and job retraining would be offered, and 4 week employment insurance for those taking leave from work for training. For anyone carrying Canada Student Loans, the interest rate would be lowered, with a 6-month post graduation interest-free grace period. That’s an estimated $2000 in savings for the average student. In addition, students can apply for a grace period from their loan for medical (including mental) leave, or for parental reasons.
3. Zero Emissions and 100% Information Access: To transition out of fuel-based autos: a cash rebate of up to $5000 for individuals purchasing certain zero-emission electric vehicles. The budget also allocates $1.7 billion towards universal high-speed internet coverage for all Canadians by 2030, and a strategy to support Canadian journalism. Individuals could claim personal tax credits on digital news subscriptions to Canadian news outlets- unless, (like Btchcoin) subscription is free : #nopaywalls
The budget also promises: $4.7 billion towards reconciliation with Indigenous peoples and infrastructure to improve standard of living in Indigenous communities, creation of national pharmacare, financial security improvements for seniors, and income support for supply-managed farmers to protect against the drop of values of eggs, poultry and dairy following the North American Trade pact. In other words, there’s a lot in this budget, and maybe a little something for everyone.
*It’s no secret two of Btchcoin’s writers are employed as political
hacksstaffers. They had no part in the writing of this article.
China vs CDN Canola
First we had the steel and aluminum troubles, now we have… canola seed issues?
Basically, China is still mad at Canada for arresting the Chief Financial Officer (CFO) of Huawei, a Chinese telecommunications giant. So they decided to hit Canada where it hurts: canola. As Carleton University’s international trade professor Meredith Lily told the Financial Post, “China always links its trade diplomacy with its foreign policy”.
Some of you may be scratching your heads, wondering why the humble canola seed is suddenly at the centre of a global criminal investigation. As it turns out, the Canada-China canola seed trade is actually pretty huge, accounting for $2.7 billion in exports (and that doesn’t even include canola oil or meal). Overall, a whopping 40% of our canola exports go to China. That’s a lot of uncertainty for farming communities.
The Chinese have cited pests as a reason for not filling their Canadian canola orders. But it goes without saying this seems politically motivated. Here at Btchcoin, we can’t help but wonder if the Chinese selected canola, a symbolic export of the prairie provinces, intentionally to further kneecap the Liberal party’s support in the region.
While the federal government has promised to do everything in its power to restore canola trade relations, (fun fact: Foreign Minister Chrystia Freeland grew up on a canola farm in Alberta) the provincial governments have been particularly vocal.
Alberta Premier Rachel Notley, currently on the campaign trail, had some fighting words; “all Albertans will be looking to the federal government to supply relief to our canola industry just as they would to SNC-Lavalin, just as they would to GM, just as they would to any other industry in the country that is in jeopardy because of[…] international actions outside our border”.
The bottom line? Amid an unstable global trade regime, symbolic industries seem to be taking the hit during bilateral geopolitical disputes. Canola farmers plan to seed their crops within the next two weeks, and they’re anxious to find out how much they’ll need to plant. But it remains to be seen whether we’ll have a resolution any time soon.
Canadian Venture Capital Holds Steady
According to a new report by the Canadian Venture Capital and Private Equity Association, $3.7 billion was invested by Canadian venture capital (VC) into start-up firms, holding steady on the consistent growth our VC industry has seen in the past 5 years. The average deal amounted to $6.1 million – not shabby for our (relative to the US) smaller market.
So what is venture capital, and why does it matter? VC is funding (or occasionally just technical expertise/advice) provided by investors to start-up companies and/or small businesses deemed to have the potential for above-average returns.
Monitoring the amount of VC funding flowing through the country is an indicator of the health of the start-up eco-system and the business climate as a whole.
VC is typically framed within the realm of the private sector, but in reality, government also plays a huge role in providing VC funding to start-ups. According to the aforementioned report, the federla government’s Business Development Bank of Canada and the New Brunswick Innovation Foundation placed among private sector heavy hitters like Real Ventures, Desjardins Capital, and iNovia Capital, when measured by the number of VC deals made in 2018.
Among the industries that attracted the most VC, information and communications technology, life sciences, clean tech, and agribusiness (in that order) took home the most VC cash.
What’s next for Canadian VC? Here at Btchcoin, we’d like to recommend that the talents and brainpower of Canadian women aren’t swept aside. It’s not secret VC has a major inclusion issue, and the numbers speak for themselves. Only 14% of partners at Canada’s biggest private sector VC firms are women, while two-thirds of VC funds are lent to firms with zero (!) female leadership.
On the bright side, we’re still doing better at women’s inclusion into VC than the US. But that…. Still sucks.
We had the chance to talk about this with Jacqueline Leung, the founder of Pressed News. She’s our #moneycrushmonday for next week, and has some pretty amazing experience finding investment for her start-up.