The Chipotle CEO is ending his time at the Mexican grill chain and plans to start as top boss at Starbucks on September 9.

Niccol, 50, replaces Laxman Narasimhan, marking what observers deem a new beginning for the renowned coffee franchise.

Under Narasimhan, Starbucks faced a litany of challenges related to unionization efforts and stunted sales growth across the globe, particularly in China.

By swapping in Niccol, the Starbucks board hopes for a successful turnaround not unlike what he accomplished at Chipotle. From 2018, Niccol helped revitalize the brand after it had been plagued by food safety scandals, resulting in severe damage to its reputation and declining sales.

He also spearheaded a new digital ordering strategy that kept each restaurant busy during the Covid-19 pandemic. With Niccol at the helm, Chipotle stock reportedly enjoyed 800% returns.

Now, Starbucks investors have a reason to be excited. For years, the company struggled to find a leader to fill founder Howard Schultz’s shoes. The mere mention that Niccol was joining the C-suite spiked the coffee company’s market cap up by $27 billion (by contrast, Chipotle’s shares plummeted 25%).

Climate-conscious customers, however, have a different take, questioning Niccol’s highly publicized commute from his home in Southern California to Starbucks headquarters in Seattle. Company brass agreed to fly him over 1,000 miles each way several times a week on a private jet. On the remaining days, Niccol can work from his home in Newport Beach, and is not required to relocate. When the arrangement was announced last month, a flurry of critics complained on social media that Niccol’s commute clashes with Starbucks’ sustainability spiel. Others poked fun at the notion of using more reusable cups and paper straws just to offset the carbon emissions generated by Niccol’s sky-high commute. Recall that Starbucks subordinates were instructed to return to the office at least three times a week back in 2023—no matter how far away they lived.

Ghana is the world’s second-largest producer of the commodity key to the manufacture of chocolates; its Cocoa Board says the decision to wean the economy off a 32-year-old syndicated external borrowing arrangement will “create more value” for farmers. The decision was part of a broader strategy to diversify sources of funding for cocoa production in the West African country, which yielded 1.045 million metric tons in 2021.

Under the new arrangement, Ghana is seeking up to $500 million in funding from domestic investors, including traders and local banks, to bankroll the cocoa sector.

But the change poses problems for the Cedi, explains Leeuwner Esterhuysen, economist with Oxford Economics Africa, since Ghana imports fertilizers for the cocoa sector. It will now have to convert the local currency raised from domestic lenders to foreign exchange in order to buy these inputs.

“This means that there will be an initial outflow of forex to purchase inputs and an eventual inflow of forex when the cocoa is sold,” Esterhuysen says. “My main concerns regarding this are that it adds increased pressure on already relatively low foreign exchange reserves and adds to weakness in the Cedi due to a lesser scope to try and stabilize the local currency.”

“The switch to local banks had been positioned as a cost-saving measure,” notes Bright Simons, vice president at Imani Africa, a policy and education think-tank, although he believes the Cocoa Board took the step only after realizing that “it was not on track to close a deal with international banks before the cocoa harvesting season opens” next month.

“The banks insisted on extended due diligence since they had a serious fear of a potential default down the road,” he says, “given that the Cocoa Board has been failing to deliver on pledged cargos to trading counterparts. Pricing for the facility had to be set to accommodate the full risks, and as late as mid-August, the board had failed to align with the banks on pricing.” According to the Cocoa Board, it acknowledged that it still had “committed contracts that need to be fulfilled through the syndicated process,” despite the shift to domestic funders.

The government of new President Bassirou Diomaye Faye has set up a commission to audit Senegal’s natural resource agreements, with the aim of “reexamining and rebalancing” them to match the West African nation’s interests.

The move comes just weeks after Senegal officially became an oil producer. In June, Australian operator Woodside Energy announced the first oil extraction from Sangomar offshore field, a project in which it has invested $5.2 billion and controls an 82% share; state-owned Petrosen holds the remaining shares.

Woodside is one of numerous multinationals with natural resource interests in Senegal, the others being BP, Kosmos Energy, Total, Oranto, Endeavour, Managem, and Dangote. BP, operator of the $4.8 billion Greater Tortue Ahmeyim gas project, is on course to make its first delivery this year. Senegal is on the receiving end of an expected $1.4 billion petrodollar windfall annually.

For the multinationals, which hope to recoup their massive investments, the overall motive and endgame of the review remain a mystery and cause for worry. But in theory, it could enhance transparency and strengthen trust between the government, multinationals, and the public, notes Catherine Lena Kelly, associate professor of Justice and Rule of Law at the Africa Center for Strategic Studies in Washington.

“Senegalese people want tangible benefits from natural resources and demand efficient use of profits,” she says.

The government has said categorically that it has no plans to nationalize projects. But, coupled with the destabilizing effects of recent regime changes in Africa, the Senegalese audit will strengthen foreign companies’ resolve to tighten arbitration clauses in their contracts, says Kenya-based energy and mining expert Patrick Obath.

“Expect arbitration clauses to become watertight, because investors abhor the uncertainties of regime changes,” he says. Going by the experiences of other African governments that have recently ripped up existing agreements, like Tanzania, close observers caution that Senegal could be walking a dangerous path.

Named head of the new interim government, Yunus, 84, was awarded the Nobel Peace Prize in 2006 for pioneering the use of microcredit as a tool to help impoverished individuals fund small businesses. Over four decades, his organization, Grameen Bank, has allocated almost $40 billion in collateral-free loans to more than 10 million people globally, particularly women, and inspired similar initiatives in over 60 countries.

On paper, the Bangladeshi economy remains one of the world’s fastest growing. Yet, not only has the accuracy of those statistics been questioned, but the government’s extensive borrowing and high cost of debt servicing have depleted the country’s foreign reserves, says Ali Riaz, distinguished professor in the department of Politics and Government at Illinois State University: “Furthermore, a combination of unbridled corruption, spending on unsustainable large infrastructure projects, defaulting bank loans by politically connected individuals, and siphoning off money to other countries by the cronies of the Hasina regime have hollowed out the economy.”

No magic wand can swiftly and painlessly resolve these issues, Riaz points out.

“However, fixing the banking sector and recovering the money which has been laundered are key issues the interim government will have to address,” he adds. “Controlling the price of essentials to help people is also necessary.”

Additionally, Riaz says, the government will have to identify wasteful spending, “For example, huge subsidies to the energy sector were pocketed by a small group of people; renegotiating the conditions of some external loans, whether received bilaterally and from multilateral organizations, may be an option that the government can consider.”          

In the US, the world’s largest economy, more corporations went under in the first half of 2024 than in any comparable period since 2010. In total, 346 companies filed for Chapter 11 bankruptcy, according to Standard & Poor’s Global Market Intelligence.

Small and midsize businesses, especially those in the consumer discretionary sector, were the most impacted. Customers, now more careful about their spending, have cut back on restaurants, clothing, and car purchases.

Thus, many eyes have been on BurgerFi International as an example. BurgerFi is a popular Floridian burger and pizza chain, which in April defaulted on senior debt owed to TREW Capital Management. This past summer, three board directors resigned and the remaining directors hired Jeremy Rosenthal, a bankruptcy specialist, as chief restructuring officer.

Will he pull BurgerFi back from the brink, or not? The company anticipates an $18.4 million loss for the quarter ended July 1. Last month, TREW tossed BurgerFi a lifeline in the form of a $2.5 million protective advance on the understanding that the chain would find a way to make good on its obligations.

European companies haven’t fared much better than their US counterparts.

Germany, the biggest economy in the European Union, is suffering; corporate insolvencies during the first quarter rose 26.5% compared with the same period in 2023, according to Destatis, the federal statistical office. France is also stumbling. The CNAJMJ, representing legal authorities, reports that the number of companies bankrupted grew 18% during the first half compared with the first six months of 2023. Neither has Japan been spared. Taikoku Databank lists 74 bankruptcies among century-old companies in the first six months of this year, the largest number for comparable periods going back to 2000. As in the US and France, experts chalk up the rise in Japanese insolvencies to tepid consumer demand, rising costs, and higher interest rates that make it difficult for businesses to borrow.

The move reportedly came the day after a board meeting at which Schneider was asked to step down.

“[This] is another sign that this is not a planned transition,” Bruno Monteyne, managing director and senior analyst with research firm Bernstein, told Reuters. “It is clearly not his choice either, or he probably would have managed a smoother transition.”

During his eight-year tenure, Schneider pivoted the company toward high-growth products such as coffee, pet care, and nutritional health products, while exiting slower-growth sectors. He also committed to halving the company’s carbon emissions by 2030 and reaching net-zero emissions by 2050.

Weak sales growth has dogged the company, however. In its half-year results released in July, Nestlé noted a real internal growth rate of 2.2% for the second quarter and just 0.1% for the entire first half on underlying trading operating profit of 7.8 billion Swiss francs (approximately $9.2 billion). As a result, the company downshifted its organic sales growth outlook for the year from 4% to 3%.

The board decided that changes needed to be made and turned internally for new leadership.

Freixe had served as executive vice president and CEO Zone Latin America since 2022, when Nestlé adopted an updated geographic zone structure; prior to that, he was CEO of Zone Americas for eight years. He has been a member of the executive board since 2008. “I have known Laurent for a long time and highly regard him as a talented leader with strategic acumen, extensive in-market experience and expertise, as well as a deep understanding of markets and consumers,” says Paul Bulcke, Nestlé chair and Schneider’s immediate predecessor. “He has demonstrated his ability to deliver results in challenging market conditions. Laurent’s curiosity fuels his passion for innovation and positive change. Laurent is the perfect fit for Nestlé at this time.”

Tan, 56, joined the Singaporean multinational lender in 2010. She will spend the transition period as deputy CEO alongside her present role as group head of Institutional Banking. Her appointment is the culmination of a decade-long succession process, the bank said. In a press briefing, DBS chair Peter Seah noted that the process included rotating succession candidates through different parts of DBS’s business and evaluating their performance.

Tan’s resume since joining the bank has included building the foundations of its wealth management business, managing consumer banking and wealth management, and leading day-to-day efforts to operationalize digitalization across those businesses. She was the unanimous choice to succeed Gupta of both the DBS board and an independent consultant that helped benchmark candidates against top names both within banking and outside the industry.

“Su Shan built a very strong foundation for wealth management,” Seah said. “She’s covered the two big parts of the bank that contribute the lion’s share of the bank’s income and she has performed well.”

Tan has big shoes to fill as Gupta’s successor, she told reporters, but “our shoes are different. We wear different kinds of shoes, so our styles may be different. But some things will not change going forward.” The way forward, she said, will still center on the “four C’s” that are integral to DBS: culture, customers, collaboration, and continuity. Tan emphasized the bank’s deep roots as the Development Bank of Singapore, but also its core philosophy of “Neighbors First—Bankers Second.” Having worked in multiple divisions, she added, “I would like to think I can bring a lot more of that collaboration internally: bringing a One Bank solution.”

The chip factory is part of the company’s long-term strategy to diversify beyond its base of Taiwan. The main focus of the factory, which is slated to launch operations in late 2027, will be to supply the continent’s automotive industry, which accounts for 5.7% of EU GDP and 12.9 million jobs, or 6.8%, of total EU employment as of 2021. Semiconductor chips are essential to engine performance, safety features, and infotainment in automobiles.

The new European venture also represents something of an insurance policy for TSMC. Taiwan is viewed by China as a breakaway province, and Beijing often strongly reiterates its long-term desire to bring the self-governing island back under the control of the mainland—with potentially serious consequences for Taiwan’s chip production. The Dresden plant deal will likely be a point of concern for China, which is Germany’s largest trade partner, and the German government has already gone to lengths to downplay the political ramifications of the venture, focusing instead on the business angle.

The EU, for its part, is also seeking to increase chip production, with an aim of doubling its share of global semiconductor chip manufacturing to 20% by 2030. A $33 billion facility planned by US chip giant Intel, which would be the largest European chips project, is still awaiting EU regulators’ approval, however.

The end of the summer in the Northern Hemisphere coincides this year with heightened expectations related to two major upcoming events. Both have been announced, but their outcome and potential consequences are uncertain: the November elections in the US and the Federal Reserve’s cut in interest rates.

The Fed and chairman Jerome Powell have recently been pretty clear: the cut—or cuts—are coming. The remaining questions are, how much and when?

The winner of the US presidential contest is hard to predict, but both major parties have generated plenty of surprises in the last few months concerning the candidates and their agendas. In a year when many major democracies are running elections and several key central banks have already lowered their interest rates, what happens in the US has consequences worldwide. Recent turbulence in the global financial markets signals precisely the magnitude of what is at stake and its potential repercussions.

In this issue, together with the announcement of this year’s Best Digital Banks and the annual Best Innovation Labs selections, we are focusing on another vital issue. Our cover story on the US-China confrontation over artificial intelligence examines the critical and very current duel between the two superpowers, detailing the specific areas of confrontation and the different approaches the two nations are taking.

Our focus is also on the potential consequences of this AI competition; we offer potential scenarios for both the near-term and long-term future. Predicting a winner is of course more difficult, but clearly the issue will become more and more relevant worldwide. Overall, we offer a rare insight into what is often—and wrongly—considered primarily a commercial war between tech giants in the US. This duel has a global nature beyond ChatGPT and its competitors.

Andrea Fiano | Editor at Large
afiano@gfmag.com

Luckily, Matthew Adams has at least two decades worth of expertise guiding him with each new policy shift and market shakeup. His resume includes various senior roles at major firms like State Street, HSBC, Northern Trust and BNP Paribas.

By 2022, Adams arrived at First Abu Dhabi Bank (FAB) where he oversees the bank’s international client base of global custodians, broker dealers and private banks.

Adams provided Global Finance with some insight on sub-custody services, his approach to client management, and the complicated nature of modern securities services. The interview has been edited for length and clarity.

Global Finance: What are the latest trends in sub-custodianship?

Matthew Adams: Sub-custodians are experiencing different trends based on regional factors, local economies and regulatory environments. There is often a disparity in how individual markets can keep pace with infrastructure developments. In the GCCE [Gulf Cooperation Council and Egypt] markets where FAB provides sub-custody services, we see a range of models. Some operate on a broker clearing model, while others have transitioned to true delivery versus payment and central counterparty [CCP] clearing models. This diversity presents a significant challenge as global investors seek uniformity in trading venues. Intermediaries and global institutions are looking for regional consistency in partnerships which can drive substantial commercial opportunities. One notable development is the emergence of the General Clearing Member [GCM] initiative. This allows international broker dealers to become remote trading members of the local exchanges. 

GF: How does that help?

Adams: There are multiple benefits to this. It eliminates the need for a local presence and the requirement to transact via a locally licensed broker. Direct connectivity with the exchanges is established to enable trading on both proprietary and client accounts using a licensed custodian clearing member. However, for the global broker community to move away from using established local broker relationships in multiple markets, we will likely need to see a standardized GCM concept across markets, with CCPs in place. The Abu Dhabi Securities Exchange and Dubai Financial Market are expected to go live in 2024, with the Securities Depository Centre Company [EDAA] in Saudi Arabia [owned by Tadawul] following in the future, promising wider adoption thereafter. To achieve post-trade efficiencies and foster commonality in post-trade processes, regional custodians can harness developments in infrastructure to reduce costs and improve overall market efficiency.

GF: Any advice for investment managers when selecting a global custodian?

Adams: The ultimate benefits of appointing a global custodian are efficiency, risk mitigation and cost savings—all captured under one contract. When selecting a global custodian, it is essential to review their due diligence policies with respect to the appointment and maintenance of sub-custodians, as well as their contingent and dual-network operations. Corporates, pension fund trustees and boards of directors should consider these aspects.

GF: Do corporates ever have a say in selecting sub-custodians?

Adams: It’s ultimately up to the global custodian to select and manage sub-custodians. What we do see is that many global custodians, in addition to running dual and/or contingent networks, may appoint an additional sub-custodian at their clients’ request. This typically occurs if the client is of a size and relationship that warrants such a request and has due cause for concerns regarding a particular sub-custodian, whether those concerns are related to risk or competition.

GF: Why are more companies seeking opportunities in emerging markets?

Adams: Many companies are looking to expand into these markets and rightfully so, when you consider the number of untapped opportunities. Many of the more successful markets in the region have a few things in common, such as having a relatively wealthy population—both domestic and foreign—large reserves of capital and most importantly, strong leadership.

To provide some context on why there is more demand in emerging-market expansion, all GCCE markets are currently classified by various metrics as emerging markets. However, each is in a different stage of development. Some, such as the UAE and Saudi Arabia, achieved significant economic progress in recent years. For example, Saudi Arabia’s stock exchange, Tadawul, has risen to take its place among the top exchanges globally since its founding 17 years ago. The market continues to expand and diversify, with around 40 IPOs in the last 12 months alone. However, it remains heavily concentrated in traditional oil stocks, with Saudi Aramco being the only Fortune 500 company in the region.

GF: What are some of the growth drivers?

Adams: Some of the factors driving growth in emerging markets include engagement with the market, pension fund reforms and a growing domestic investment fund industry. 

Strong local or regional financial institutions and service providers can engage with the markets and push for solutions in line with international investor requirements. Many GCC markets have seen a surge in IPOs — the majority of which have been vastly oversubscribed.

Regarding pension fund and saving reforms: The UAE is changing the existing end-of-service benefit, which will divert capital investment into domestic mutual funds. This move will shift multiple billions of dollars from what is effectively an accounting liability into the capital markets in the first year.

A growing domestic Investment Fund industry supports further capital investment, employment, and greater efficiency in relation to capital markets. In the UAE, there is a move to mandate for onshore licensed funds to act as feeders to what is currently and largely a distribution market for offshore funds. 

Progressive regulatory reforms are also driving growth. We expect that Saudi Arabia, the largest domestic fund industry in the GCC, to require independent fund administrators to calculate NAVs—a market standard in the larger global fund markets. This will bring further comfort to investors and lead to additional investment in listed securities.

The ability for sub-custodians to keep up with and manage these regional changes to facilitate clients’ entry into these markets is paramount. This is where institutions like FAB can play a pivotal role in assisting across the spectrum of the regional markets which are our “home” markets, promoting interoperability and consistency to increase accessibility and ultimately boost investor confidence.