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Israel Start-Up Nation: Have 4 elections made a difference?

24 March 2021
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Categories: Afternoon Tea in Jerusalem, Business, Israel, Jerusalem

Yesterday, Israel went to the polls for the 4th time in 24 months. It seems that the PM, Netanyahu, may be able to form an almost-stable coalition. Putting the politics aside for a moment, where does this new situation leave the ‘start-up side’ of the economy?

Let’s start with 2 bizarrely contrasting perspectives. This time last year, Israel was boasting that it had nine Unicorns in its hightech economy. Today? See my latest post on LinkedIn, which shows how the number has soared to over 70.

Just yesterday, Israeli cloud security company Orca Security announced that it had completed a $210 million Series C financing round on a US$1.2 billion valuation. The company was only founded in 2019, ironically at about the same time as the start of the country’s political crisis.

This leads me conveniently to the second viewpoint. For all this time, the government has never been able to provide the country with a national budget. To spell it out: As success as led to more success for Israel’s start-up nation economy, there has been no central direction from the numerous Ministers of Finance.

It has become quite obvious for several months that it has been the hightech sector that saved the Israeli economy from imploding during the height of the corona crisis. Orca Security is not alone. For example, Israeli adtech platform ironSource will list via SPAC at $11.1b valuation.

There is a dearth of suitable talent to fill the continuing numbers of positions opening up.  According to Startupblink’s 2020 Startup Ecosystem Ranking, Israel is placed third place in terms of its startup ecosystem (following behind the UK and the USA).

So, who needs a budget and governmental direction?

There are core parts of the Israeli economy and society that need support, ignored for years or devastated by the fall out from corona. For all those names listed here and who have made it big-time, there are thousands of start-ups, both starved of resources and with little hope of reaching influencers or required investment levels. The government appears to have lost its ability in this arena.

Over the past 12 months, talent has oozed out of the top civil service posts in the Treasury in Jerusalem. And the immediate task of an (assumedly) new Netanyahu government will be to save him from the courts, and also to provide his coalition allies with as much money as needed to keep them silent.

The Orcas of Israel will not be bothered by such a course. The problem lies for those who struggle but deserve to have a chance as well. These start-ups are the future of the country’s economy.

Why set up deal flows with Israel

10 March 2021
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Categories: Afternoon Tea in Jerusalem, Business, Israel

I have two amazing conversations this week with overseas contacts. They are not connected commercially nor by country. Yet both carried the same message.

We need to link our set up to the world of Israeli entrepreneurship. This is what our clientele are asking from us.

And it is easy to see why. “After raising a record US$10 billion in 2020, Israeli tech startups have already raised US$2.5 billion in the first two months of 2021…….The figure may be more as some companies prefer to remain in stealth ……”

And if you believe this a one-off freak, just consider some of the news from the first 10 days of March:

  • PayPal Holdings Inc. has agreed to acquire Israeli digital assets security company Curv for around US$200 million.
  • Israeli payroll solutions company Papaya Global has announced a $100 Series C financing round at a company valuation of over $1 billion- ie, Unicorn status.
  • Wiz, Orca Security, and Axonius are planning to announce in the coming weeks that they have completed large funding rounds at valuations topping $1 billion each.

Regular reader will know that when it comes to economic planning, I believe that the government’s record over the past 24 months is nothing short of derisory. It is as if the domestic entrepreneurial community has created a virtual wall between itself and those who think they know better. Thanks goodness for that!

Why? How has this phenomenon arisen?

There is a well-known idiom in the Israeli start up culture which encourages you to start from the premise: Whatever you assume to be correct, test, challenge and assess from a new perspective.

Some argue that this concept emerges from the lessons of the 1973 Yom Kippur war, when the intelligence community’s assessments allowed the army to prepare inadequately. Others trace this psyche back to old-fashioned Jewish DNA called ‘chutzpah’ – just keep pushing the boundaries.

Take it as you wish. What is evident is that despite an economy looking to shake off the shackles of corona and despite the political instability expected to continue into the early summer, the thought of the “Israeli Start-Up Nation” is alive and thriving in 2021.

Israel’s Minister of Finance, and his ‘Ides of March’ moment

9 March 2021
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Categories: Afternoon Tea in Jerusalem, Blog, Business, Israel

We are approaching the 15th of March, the day when the Emperor Julius Caesar was stabbed to death by his friends. “Beware the Ides of March” wrote Shakespeare.

Yesterday, we learned that the debt of the Israeli government jumped to 12.4% of GDP, the total of the value of what the country produces.

Obviously, like many countries, the central authority has had to save the economy from the wretchedness of corona. The problem is that the numbers continue to get worse, despite the apparent improvement in the country health stats. (I can only assume that there is a change for the better, as most lockdown restrcitions have been removed.

What is worse, as I have mentioned several before at the risk of being boring, there is no budget. A budget offers you a framework, targets, direction. The Israeli populace has not benefitted from any of these essential elements.

To show how farcical the situation, I repeat what one commentator described on the radio this morning. Apparently, because there is no rule book in place for 2021, any expenditure above 50,000 nis (about US$15,000) requires special approval – even if this is to purchase stationary for a government ministry!

Do not be fooled by any seemingly positive stats.

Sure; average wages by 7% in 2020, primarily because those jobs lost from corona were lower paid positions.

Israel’s international trading account hit a massive surplus last year, more to do with the strength of the Israeli current rather than the discovery of additional markets.

Yisrael Katz, the Ministry of Finance, remains optimistic. He has to be. That is his job, especially just before an election. A better indication of the immediate future comes from his appointee, Prof. Amir Yaron, the Governor of the Bank of Israel. Despite inflationary concerns, he is intent on keeping down rates of interest.

Let me spell it out: The Bank of Israel believes that the government’s policies are unlikely to ease the country out of the fiscal mess. He is worried. After all, as I wrote above, somebody has thrown away the rudder.

Punctuality is not a characteristic associated with Israelis. If you ‘shift’ the 15th by 8 days, you come out at 23rd March, the day of the general election. Israel’s Minister of Finance will turn up at the market of polling booths and will find out if and by how much his electorate believe that he can save their bank accounts.

Beware sir! The social implications of that debt are too hard to hide for ever and a day, ………… although maybe another 2 weeks will suffice.

Real numbers – Fake reports: Presenting Israel’s economy to the voters

21 February 2021
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Categories: Afternoon Tea in Jerusalem, Business, Israel

Wow. Israel’s economy shrank by only 2.4% in 2020. This is far less than had been initially feared. Compared to others in the OECD family, this puts Israel’s ranking in the top third.

Approaching the general election on 23rd March, the Prime Minister will probably be waving this stat at any journalist, who will listen. He will be hoping that Israelis will be feeling the turn-around. After all, today, Sunday, is the day, when shops are reopening after yet another lockdown.

So, what won’t the PM be pointing out? Yes, unemployment is stuck for now at 15%. Much worse is the analysis of the experts of that 2.4% number.

Exports, particularly high-tech sales, have maintained themselves. Companies like Intel had a bumper year. However, the real growth in sales overseas came from the goods sector (5.2%) rather than services. The latter surprisingly dropped nearly 3%.

So, if that was the good news, where is the black hole?

Private consumption, the amount spent by the average household, plummeted 9.4%. People have not been able to splurge on themselves. Interestingly, this area of activity is known to be responsive to government policies and statements. And yet, the Prime Minister has been unable / unwilling to pass a new state budget for three years.

That 9.4% stat one of the worst in the OECD. And when you allow for the increase in population, you realise the personal spending power of the individual voter has dropped 11.1% in 12 months. It is additional government spending – debt to be paid off in the future – that has taken up the slack.

But the typical voter does not see or know that.

Voters generally do not decide on the base of a few numbers. What counts is what they feel they do (or don’t) have in their pocket, and also how they perceive that could change after election day.

Politicians know what they need to report. Watch out for real numbers, mixed with fake interpretations.

Oggling the Israeli economy, from the outside

16 February 2021
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Categories: Afternoon Tea in Jerusalem, Business, Israel

Over the past two weeks, the international media has focused heavily on Israel’s successful inoculation campaign. More good news – the economy contracted in 2020 by ‘only’ 3.3% last year, and should recover much of that this year.

Within the country, opinion is far more divided. After all, if the government’s handling of corona over 12 months was considered so successful, it would be sweeping towards a triumph in the general election, scheduled for 23rd March. At this stage, polls indicate that around 50% of the electorate are withholding their trust and confidence.

Domestically, everyday prices remain high. Up until around the end of the 1980s or so, Israel had a reputation for low food prices, particularly when it came to fruit and veg. That situation has long passed by.

Yesterday, a joint ministerial committee released a report on the trade and services sector. Guess what? “Businesses in the trade and services sectors are affected by burdensome government regulation. Getting these sectors onto a track of growth and higher labor productivity necessitates a long-term view in planning and execution, and introducing significant changes in existing government mechanisms,” 

To put it bluntly: There are multiple layers of bureaucracy, which stifle innovation and causes high prices! You would never have guessed that we were living in 2021, in the start-up nation.

For example: Israel’s National Insurance (NI) system employs thousands in several large locations around the country. Yet, a couple of years ago, Israeli TV covered one of the Baltic states with a similar population size. It visited their NI offices – all was computerised. No large queues, waiting for poorly trained clerks.

How about my client? She wants to set up a food manufacturing business. She needs three sets of licenses, from offices that do not coordinate with each other. The rule of thumb is that you start producing and eventually the time-consuming paper work is paid for and completed. It is a farce.

By the way, if you know how to play the system, you can make a fortune. The imports of fresh produce are heavily regulated. This protects local growers, keeps prices higher than necessary, and means that Israelis cannot buy out-of-season fruit.

And of course, there is Diplomat, the sixth largest player in the food market in Israel. They are the sole importers for a series of leading products found in nearly every home. How well are they doing? They are going for an IPO, valued at 1 billion shekels.

The good news is that nearly every year, the Prime Minister, Netanyahu, makes a statement, declaring a war on bureaucracy. If he wins again next month, he will obviously be in a position to make a similar speech in 2022.

Israel’s new economy – thanks to corona

7 February 2021
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Categories: Afternoon Tea in Jerusalem, Business, Israel, Jerusalem

Reading through the weekend newspaper in Israel made for depressing reading initially. It looks like the new Kenesset (Parliament) will have as many factions as ever, with few showing signs of the leadership desired by their voters. The death toll from corona has passed the 5,000 mark. Businesses are folding all over the place, including 1,000 coffee / restaurant outlets.

Amongst all the gloom – yes, we are thinking of recancelling our subscription – came two separate notes of optimism, both clearly sparked by the corona crisis.

Let’s start with the neighbours. A few weeks ago, we were taking our Sabbath constitutional, when we noticed a small plot of greenery. There was a newish sign, explaining that it was a ‘community garden’, set up over the past few months. It was sponsored by the local council.

According to an item in the paper, similar initiatives are sprouting up (pun intended) all over Israel. It is estimated that there about 400 such projects, many coming to fruition since February 2020.

I was particularly attracted to the story of the garden in Mea Shearim, an over-crowded, ultra-orthodox neighbourhood in Jerusalem. It is mainly cared for by local women. As ever, it thrives on the back of volunteers, donations and a few shekels thrown at it by local authorities.

Wonderful stuff! It reminds of stories when during the Second World War, such things blossomed in the Britian.

And if you are more of the stay at home type, well you can join a growing crowd of people investing in the stock exchange from their laptop. It is estimated that in 2020, 141,000 new accounts were opened by individual Israeli investors, a 44% jump on the previous year.

What are the reasons for this spark? Well, nothing in particular, it would appear. An item in the newspaper refers to:

  • Boredom, fed up just doing the same things on the computer.
  • The availability of spare cash not being spent on holidays
  • Annoyance that the banks / investment houses take healthy profits.
  • New apps to help the intrepid entrepreneur
  • the feeling that life is too short not to take a chance

Maybe these suggestions explain why stock markets around the globe are still moving forward, when ‘experts’ have been expecting a crash for the past year.

What the two items illustrate is that society is reacting to corona. Israelis are not waiting around for a hapless government to show them how. Corona is changing us and our economy in more ways than we realise.

The impact of covid on Israel’s economy

4 February 2021
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Categories: Afternoon Tea in Jerusalem, Business, Israel, Jerusalem

Covid has been with us for about a year. This time last year, I was leading an overseas guest around Israel’s primary investor conference, hosting sessions with Fintech and health care services.

Since then? Well maybe not too bad, at least relatively. According to the US-Israel Legal Review 2020 just released:

While in North America high tech investment is down 10% compared with 2019 and while in Europe we have seen a 20% reduction, in Israel there seems to be a 40% increase compared to the first half of 2019.

Moving into 2021, that pattern seems set to continue. New unicorns are emerging almost weekly. Specifically, look at the progress of Intel. “Revenue in 2020 was $8 billion, up 14% from $6.6 billion in 2019. This figure represents 2% of Israel’s GDP and 10.27% of Intel’s overall annual revenue of $77.9 billion in 2020.”

Unfortunately, the lack of direction for the past three years from the government in Jerusalem is no longer able to conceal worrying trends. As outlined in the newspaper “Ha’aretz“:

  • GDP per capita isn’t picking up
  • Deficit will weigh on the government
  • High unemployment won’t disappear
  • Small and medium-sized businesses have taken a big hit
  • Permanent uncertainty remains

Nothing positive is likely to happen until after the general election on March 23rd. Given the fact that this is followed almost immediately by the week-long Passover festival and then assumedly by the customary coalition squabbling for a couple months, serious financial planning cannot commence until the mid summer at best.

Thus, even if a new policy were to be implemented shortly afterwards, Israel cannot expect any new strategic measures to have an impact on the corona worn economy before the early next winter at best!

We talk about the tragedy of corona. We know that other serious illnesses are not being treated because corona drags on health resources. We note the rise of violence and social distress in communities.

None of these are excuses for the disgraceful performance over years of Israel’s government, when it comes to the economy. What covid has shown is that the triumphs mentioned above have occurred despite rather than because of those who think they are in power.

Can incompetence save Israel’s small businesses?

27 January 2021
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Categories: Afternoon Tea in Jerusalem, Blog, Business, Israel

On Sunday evening this week, Israel’s Prime Minister and the Minister of Finance held a press conference to launch a 15 billion shekel (approx US$4.5 billion) rescue plan, targeting households and small businesses.

The package includes a series of grants, the delaying of statutory payments like VAT, the deferral of loan repayments, and more. Ostensibly, there is much to be commended here. Although you are left wondering why this has taken 10 months to emerge!

And here in lies the rub. According to Israel’s Attorney-General, because the handouts have been delayed so long and appear to coincide with the onset of a general election – scheduled for March 23rd – large parts of the plan will probably be deemed illegal.

If that was the only problem with the ideas, maybe the dynamic duo might have got away with it? Maybe, but there is worse to come.

  1. It appears that core elements of the Ministry of Finance were not involved in the formulation of the project. This was denied, strangely by the cabinet secretary.
  2. As for the Bank of Israel, the Governor is reported to have received a copy of the plan within the hour prior to its release. He was later to reject it, as failing to concentrate on growth stimulation.

We know that the standard of living in Israel fell by over 20% last year, particularly amongst the nebulous middle classes. We know that there has been no budget for three years, as we enter 2021, which endangers the survival of projects, designed to bolster the economy. And we know that the hospitals (for years) are short of beds and lack qualified medical teams.

There again, as one commentator observed with an eye on that date in March, hospitals don’t have a lot of votes.

As for the small business sector, what is required as much as money is clarity of planning, direction and hope. That means a full budget, which a Netanyahu-led government has been unable to deliver for years.

What we need to learn from Israel’s management of corona – not what you think!

24 January 2021
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Categories: Afternoon Tea in Jerusalem, Business, Israel, Jerusalem

Israel has received international praise for its rushed inoculation programme against the covid-19 virus. We can read about it in the press, on the BBC, etc. Politicians in Parliaments across the world have asked the governments to follow the example of Jerusalem.

And yet……

After 4,300 people have died from corona and around 1.100 are still in critical condition, including a worrying and rising number of children, you have to question if the decision makers in Israel are finally getting it right. To give the horrific numbers some proportion, roughly 3,500 Israeli civilians have been killed in terror attacks since the founding of the state in 1948.

Israel is almost an island. New Zealand had less than 50 deaths. In Australia, the state border between New South Wales and Victoria was closed for weeks.

  • So why did the Israeli government allow in thousands of seminary students at the beginning of the crisis, if not just to please the Prime Minister’s coalition allies?
  • Why have fines still not been sharply increased, if not just to please Netanyahu’s coalition allies?
  • Why was the first lockdown relaxed so quickly if only just …. ?
  • And why has international travel been allowed to take place if………… well, maybe in this case to please Netanyahu’s overseas friends in Washington and in the Gulf.

We read in today’s newspapers that the Prime Minister is now determined to shut down air travel, except for emergencies and trade. He is worried about the mutations. Where has he been to date? And we learn that the ultraorthodox community of Vishnitz is determined to keep open its schools. Why does he not cut off their public funding?

The election is never far away from this subject. My thoughts on the government’s ‘newspeak‘ that the economy will soon open up in full were posted last week. A day later, a TV exposure revealed the farce behind the failure of the Finance Minister to pass the state budget, for the third year running. And on Thursday, details were released of the growing state of poverty in the country.

Yes, the stock market and hightech is keeping the country’s economy afloat. Yes, the government hand outs to the unemployed are important for thousands of families.

But where is that leadership, which every country needs and deserves in a time of crisis? Where is that firm and persuasive, yet compassionate voice that speaks to everyone, regardless of their location on the political map?

If you were to manage your team, your organisation, your country, is this what you would be doing?

POSTSCRIPT:

  1. It would appear that the Vishnitz schooling system remain closed, formally, but there were a bunch of other loopholes very visible to be seen by various reporters.
  2. With some irony, New Zealand today reported its first corona case in months.

Government decision making in the age of corona….actually, whenever!

19 January 2021
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Categories: Afternoon Tea in Jerusalem, Israel

On 28th March 2019, Rob J. Whitney posted the following on Facebook.

Pls note that I have no idea who this gentleman, who was assumedly targeting a British audience – at least, initially. Further, this date is almost a year before the dangers of corona were fully understood around the world.

What follow is copied in full.

I offer no further judgement. All I know is that Israel has yet another general election on March 23rd 2021. This literally exploit has certainly helped me to make up my mind.

Oxford University researchers have discovered the densest element yet known to science. The new element, Governmentium (symbol=Gv), has one neutron, 25 assistant neutrons, 88 deputy neutrons and 198 assistant deputy neutrons, giving it an atomic mass of 312.

These 312 particles are held together by forces called morons, which are surrounded by vast quantities of lepton-like particles called pillocks. Since Governmentium has no electrons, it is inert. However, it can be detected, because it impedes every reaction with which it comes into contact.

A tiny amount of Governmentium can cause a reaction that would normally take less than a second, to take from 4 days to 4 years to complete.Governmentium has a normal half-life of 2 to 6 years. It does not decay, but instead undergoes a reorganisation in which a portion of the assistant neutrons and deputy neutrons exchange places.

In fact, Governmentium’s mass will actually increase over time, since each reorganisation will cause more morons to become neutrons, forming isodopes. This characteristic of moron promotion leads some scientists to believe that Governmentium is formed whenever morons reach a critical concentration.

This hypothetical quantity is referred to as a critical morass. When catalysed with money, Governmentium becomes Administratium (symbol=Ad), an element that radiates just as much energy as Governmentium, since it has half as many pillocks but twice as many morons.

“The full opening of the (Israeli) economy will probably be in March.” Aha!

18 January 2021
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Categories: Afternoon Tea in Jerusalem, Business, Israel, Jerusalem

It appears that “Israel’s economy was one of the least damaged during the Covid-19 pandemic, compared with other OECD countries”. Encouraging. And the three leading international credit rating agencies have all affirmed Israel’s current status, which is good news for a government trying to borrow extra money.

But then we are told from an on-line news agency, known to be close to the government in Jerusalem and citing a senior Israeli official that: “the full opening of the economy will probably be in March”.

Just who are they trying to fool, and why?

First of all, Israel is an economy, which is dependent on trade. The USA and the UK are barely starting their inoculation programmes. Australia is unlikely to open its borders fully before the end of 2021. So, thousands of people in the travel and tourism industry as well as those people who need to get overseas for work are still going to face restrictions. Ooops.

But you may argue, Israel has a successful inoculation campaign, fully claimed by the Prime Minister. True, but at the moment many European countries and the WHO are playing down the importance of the ‘green card’ and who can travel with it. Another oops.

Then there is this niggling problem called corona. Despite the inoculations, the death is at 4,000 and rising. Because of a 9.1% infection rate – a stat the PM will not be seen quoting – the hospitals are full. Staff are at breaking point. Years of starving the system of new beds and trained teams are now beginning to show.

Though successful in its rollout of the COVID-19 vaccines, the country has been unable to fight the spread of pathogen among the population, thanks to mishandled policies, politically motivated decisions and unkept promises

Nadav Eyal.

I could not have put it better myself. The commentator emphasises how the government has failed to install social discipline in two large communities, which (ironically?) are those who have valued for their voting power.

For an economy to get back to a “full opening”:

  • Scores of boarded up shops will miraculously have to finance new stock and reopen.
  • At least 4,000 families will have to shake off the loss of loved ones and just return to work as normal.
  • The need for medical procedures, postponed during corona, will no longer be deemed necessary.
  • The increased social suffering behind closed doors – violence, drugs, etc – will no longer impact on people’s lives.
  • Unemployment – around 4% before corona and 15% today – will simply flitter away.

Just who is this ‘senior Israeli’ trying to fool, I asked. Who cares? There is an election due in two months. Every extra vote may count in a close contest. So the end – the fake news – must justify the means, no?

Will a miraculous history rescue Israel’s economy?

12 January 2021
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Categories: Afternoon Tea in Jerusalem, Business, Israel

So it’s official. In 2020, Israel’s economy imploded by 3.3% and left a budget gap of nearly 160 billion shekels, devastation not seen since the 1980s.

No doubt the optimists, which are by chance often proponents of the ruling Likud party of Mr. Netanyahu, will argue that 3.3% down is brilliant – nothing compared to the sufferings in many other members of the OECD. (An interesting piece of spin, as Israel slouches towards another general election). And I should point out that Israel’s tech stocks are “bubbling“, as the country’s hightech sector has closed another brilliant year of investments.

There are some technical stats that drive a vast hole in the attempt to be positive.

  • 12% unemployment, and a state aid system that encourages people to stay at home.
  • Inner cities abandoned by hundreds of small establishments
  • Approx 30% of businesses have not taken up available government aid, primarily because of bureaucracy or …….
  • ………Around 75,000 businesses have shut up shop this year.

It is the last point that is particularly worrying. Over the period 2013 to 2019, around 55,000 operations opened up every year, about 12,500 greater in number than those that closed. That means the failure rate for 2020 has shot up around 75%.

This means that government aid has at least been partially misdirected. It also means that the government can collect less taxes. Local councils will receive less in revenue from rates. And more needs to be paid out in welfare.

Who will fund all that budget deficit? (I suppose that is not a question that the Likud politicians need to answer until after the general election).

History may give us a hint of what could happen to the Israeli economy, and here there is an excuse for a small smile. There have been dark spots before, notably after the 1973 Yom Kippur war or following on from the 2008 global credit crisis or after the military escalations in Lebanon. On each occasion, somehow ‘things worked out’ much quicker than had feared.

In other words, when challenged, the Israeli economy has demonstrated resilience and flexibility. Where could that come from in 2021, I will not predict here. Stay tuned.

This is what YOU can learn from Israel’s inoculation campaign against Corona

10 January 2021
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Categories: Afternoon Tea in Jerusalem, Business, Israel

This time last week, international media sites were reporting how Israel is leading the world in inoculating its population. The BBC, The Washington Post et al discussed how the Holy Land had already handled 12% of the first round and is pressing ahead.

I could be cynical and say that it was the week of New Year and before the ‘coup fracas’ in Washington DC. There was little else to write about. In Israel, the Prime Minister made sure that his face was seen next to this positive statistic.

Israel has certainly pulled out all the stops to ensure that just about all those over the age of 16 and who want to be vaccinated will have been jabbed by the end of March. Deliveries from Pfizer and Moderna have been stepped up, but is this just because of our Prime Minister?

As we learned in the weekend press, tt seems that there are two key reasons why these companies have upped their cooperation levels with Israel. First, it has been explained to the companies that the four health funds in the country provide an amazingly efficient platform for a national inoculation campaign. After a few teething issues, that has proved to be the case.

Second, because of the nature of this strategy, the country can monitor the effectiveness of the inoculation. This is medical data of the highest quality. The results – not private information – will be shared with the manufacturers.

What we also learned from the press is that Israel has been forced to enter its third lockdown from Friday. Actually, this was originally set for two weeks ago, but few listened and there was no police enforcement. So as shop owners were forced to close, the infection left to over 6%. Serious cases currently stand at nearly 1,000, while the overall death rate is galloping towards 4,000.

Why was a lockdown was never enforced properly until now? Certainly, this would have impacted directly on some of the PM’s core coalition constituencies. And so I am writing this from home and not my office.

But what really disgusts me was how certain interest groups have been prioritised – or not – when it comes to receiving the inoculations. I read on the weekend that employees at the office of the Prime Minister have been placed towards the top end of the queue. However, special ed teachers – the one section of the education system still operating this week – have not!

Are you surprised? This is a country that has already had three election campaigns in two years. In the first, the Arab community was mocked by the leading party of government. Then it was the turn of women, and after that those with speech defects.

It will be election number 4 on 23rd March. Take a bow all those wonderful educators for stepping forward to be the latest whipping kids of the government.

What I have learned from this inoculation campaign is that it is going well, and this has little to do with the efforts of the Prime Minister. His role has been to delay other decisions – ie, the enforcement of what should have happened 12 months ago and could have saved countless lives and businesses.

How come an election costs so much money in Israel, when nobody is listening to the politicians?

5 January 2021
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Categories: Afternoon Tea in Jerusalem, Business, Israel

March 23rd 2021 is election day in Israel – for the fourth time in two years.

If you take into account the extra finance for the parties, the cost of maintaining the booths and the counting, and the lost productivity as it is always a general holiday, the country is expected to “invest” about two billion shekels (approx US$600 million) into putting on this jamboree. Aha!

As I ask, who is listening, especially when this is round 4? What else is left to say?

Well, there are some new parties, breakaways from the bigger players. And there are some genuinely new parties, formed by people over the age of 70. So nothing overtly inspiring. As many people have been telling me, they have cut down on the number of newspapers they buy and the TV news they used to watch. i am part of that section of the electorate.

If that two billion shekels is not enough, the government has finally started to formulate a plan to help the small and medium sized business community. The official plan is called and I quote: ‘From blocking to growth”. (This of course raises the question as to who or what has been doing the blocking until now?)

Today, the Finance Minister and I (Prime Minister Netanyahu) are submitting a proposal to give over NIS 2 billion in additional grants to the self-employed and to business owners. This is thousands of shekels more for every business owner who has been hurt during the coronavirus period. We are also extending the period for paying local property taxes. The money will – immediately – make it easier for businesses and within a short time we will open the entire economy and we will emerge from the crisis once and for all.

So we can afford to spend 2 billion on unwanted elections, because the governors cannot govern, but all the SMEs together are only worth that same amount.

Interesting. Ironic? Sad! To be fair, money has previously been made available. And what is helpful is that the conditions of the programme today are much improved. But why of why wait until an election campaign has been started?

This coming Friday, Israel is likely to commence another full lockdown. None of the previous three have been properly enforced, which raises another question: How can a person vote for a government that has not blatantly done its utmost to protect your safety?

However, one benefit of the lockdown should mean that more eager voters will be at home…………. with time to watch their favourite politicians on the news, no?

Israel’s economy plops into 2021

30 December 2020
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Categories: Afternoon Tea in Jerusalem, Business, Israel, Jerusalem

Israel’s economy will start 2021 with no budget for over two years, a third lockdown (with as many holes as a piece of Swiss cheese) ,and an election looming on March 23rd. That means no full approved central planning will emerge until the early summer at best.

So which politician cares that an extra 100,000 will be added to the unemployment listings because of the lockdown? Which salaried decision maker will feel the impact of a further US$1.5 billion oozing out of the economy?

It is worth quoting serial investor Michael Eisenberg:

Netanyahu did not proactively undermine Israel’s national resilience, he just didn’t do anything about it. Considered one of the most intelligent leaders in the world, Netanyahu failed to take advantage of the immense opportunity to attract future human and financial capital to the country……..The fossilized economic thinking of Bibi’s ministers and advisors is firmly rooted in the 20th century……

Yesterday, I had the good fortune to be part of a forum, led by MATI Jerusalem. There were about 30 business mentors and coaches and a further 6 staff members on the discussion. MATI has been promoting business generation in the Jerusalem area since the late 1980s.

The core take away from the session was definitely one of optimism.

So why can 2021 be a year of opportunity for small businesses in Israel, especially when the government will be providing precious little direction and leadership initially?

And maybe that ‘rudderless’ factor is also part of the answer. Business owners are learning to rely on themselves. After all, the loan schemes and employment benefits have been riddled with anomalies. What is left is self initiative and resilience.

Here is a cute anecdote to illustrate my point. At least for this week, restaurants in Israel are only allowed to sell via a delivery service. Take-aways are prohibited. One cafe owner explained in front of TV cameras that he has informed all his regular clientele to approach his premise, call him from 100 meters away with their order, and he will “deliver” to them.

As Eisenberg wrote, Israel’s current economic decision makers are stuck in the past. Let us hope and pray that 2021 will bring in a series of new recruits.

Israel heads to elections in March 2021. Israel’s economy slouches back to two years

23 December 2020
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Categories: Afternoon Tea in Jerusalem, Business, Israel

So Israel is heading towards its fourth general election within 24 months. The Kenesset (Parliament) failed to pass the 2020 budget and thus the government automatically fell. In other words, despite controlling the Finance Ministry since December 2014, the Prime Minister has failed to deliver a budget since December 2018, and nothing serious is planned for 2021.

How can the economy carry on?

Earlier this morning, I listened to a seasonal wrap up of the global economy from the Economist Podcast Unit. (Recommended). Overall, the participants were cautiously optimistic for 2021. I could not offer the same prognosis for Israel.

I agree with S&P’s analysts that there are still strong fundamentals, like the balance of payments. And yes, Israel is riding the global trend, where investors are ploughing big money into hightech.

However, hightech represents about 15% of the economy. Around 95% of the economy is made up of small or medium sized businesses that are struggling.

Last week, I was shopping in the centre of Jerusalem. In what is known as “the triangle”, a key retail area, I would estimate that around 15% – 20% of the premises had shut up shop and gone. I asked one well-known shop owner if he had been visited by local or central bureaucrats or politicians. As he said to me with a wry smile, “they are too busy”.

The Israeli economy has already contracted by nearly 3% this year. It is unlikely to make that up next year, even more so as the political uncertainty will continue until the early summer. (It is assumed that it will take a further 6-8 weeks after the election to form a coalition). Meanwhile, as the country approaches its third lockdown, unemployment remains at over 14%.

The government budget provides direction and guidance. No budget means that everyone is left to fight for the themselves. With healthy fundamentals, you can get away with that for a while. However, sooner rather than later, you end up destroying what has been created in the past.

It does not take two years to pass a budget. That is a sign of incompetence – politicians playing politics with the health of people’s finances – and those of their children – setting lives back years. I hope that those responsible for this negligence will be thrown out of power.

How to be a successful start up in the year of covid-19: 10 Israeli case studies

9 December 2020
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Categories: Afternoon Tea in Jerusalem, Business, Israel

About once a year, I publish a full article that has been posted elsewhere. As we are in mid-December, I feel it is finally time to ‘honour that tradition’ in 2020.

The financial newspaper in Israel, Globes, has just announced their annual award for the most promising start up of the year. Congratulations to Bizzabo!

However, such announcements always prompts the question: Whatever happened to last year’s success stories, especially as one might expect covid-19 to have a negative impact?

Globes has not disappointed. Below you will find a list of the top ten performers in 2019, startups that “were able to surmount the obstacles, get back on track, and even prosper,” this year.

I encourage you to read on and learn how they overcame the roadblocks:

No sooner had the year begun, when IoT security company Armis (fourth place) announced on January 7 that it was being acquired by venture capital fund Insight Partners for $1.1 billion. It was an unusual model for an exit being acquired by a venture capital fund. In effect it was a large secondary deal with the founders and employees realizing some of their shares and the company continues to operate independently.

Armis was forced to develop a product that could be installed remotely and after a weak second quarter, activities recovered and they are set to end 2020 more or less realizing their original forecasts.

Last year’s top ranked startup of the year was DriveNets, which has developed cloud software for communications networks infrastructure. DriveNets, founded by CEO Ido Susan and chief strategy officer Hillel Kobrinsky also had to find alternative ways for installing its solutions on customer’s networks. But the company enjoyed high demand from the start because of the changing ways in which Internet networks were being used – the shift to home working and studying made existing networks inefficient because they were built on the major part of capacity being within the office.

DriveNets made it possible to manage networks more flexibly and communication companies understood that this solution was needed by them. DriveNets also announced during 2020 that the core network of AT&T would be based on its technology.

Last year’s most promising startup runner-up JoyTunes, which has developed an app for learning the piano, also benefitted from the Covid-19 crisis from the very start. By April, JoyTunes had surpassed its annual target and in a June interview with “Globes” CEO Yuval Kaminka said, “Coronavirus uncovered something that in fact we knew that people really want to learn.” It’s clear that they will invest less time when they return to routine, he added, but somebody who has discovered that they love to do something will invest more time afterwards.

Third placed Fabric also benefitted from the pandemic. The company builds urban supply chains for retail in city center warehouses operated by robots. Fabric said the company enjoys high demand but operations are still in the relatively early stages although it has opened its first warehouse in New York.

Fifth placed Verbit, which develops technology for automatic transcripts and captioning, raised $60 million last month, to bring the total it has raised to $126 million and said that revenue has risen 400% over the past year.

Sixth placed Trigo, which develops technology allowing stores to dispense with checkout tills, said that it has met its targets in 2020 despite Covid-19, despite the shift in purchases from brick and mortar stores to online, in part because people are reluctant to wait in link at checkout because of the need to social distance.

Seventh placed Papaya Global, which has developed a payroll and payments automation platform, completed a $40 million financing round and has raised $95 million since it was founded.

Eighth placed Logz.io, which has developed an open code based data analysis system for programmers that can identify errors, raised $23 million, after raising $52 million in 2019, and has raised a total of $120 million.

Ninth placed Wiliot, which has developed a battery-free Bluetooth chip, has also enjoyed heightened interest during the Covid-19 crisis because of the increased amount of deliveries and the need to track the consignments that are sent. Medical deliveries for example require tracking to ensure that chilled temperatures are maintained.

Tenth placed Duality Technologies, which has developed technology for analysis of encrypted data, said that it continues to grow and has imposed no layoffs or salary cuts.

Election economics revisited – Israel, December 2020

3 December 2020
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Categories: Afternoon Tea in Jerusalem, Business, Israel

Unless there is a last minute compromise – which could only look pathetic and ugly in the eyes of the public – Israel is spluttering, repugnantly and embarrassingly – to its fourth general election in 24 months. To illustrate how paralysed the decision-makers appear, current estimates do not assume a poll could be organised for at least 45 days, and possibly not until mid May!

It gets worse.

Sure, you are probably wondering, should not politicians be thinking about protecting people from corona rather protecting their own pensions? Yes, some public health officials have declared that the ‘third wave’ is already with us. There again, whatever his reasons, Prime Minister Netanyahu will not be summoning the corona cabinet to meet this week. Is he too busy with other matters?

As for the economy, I cannot be optimistic. No budget was passed for 2020. No budget for 2021 can be approved before February next year, and that in the most hopeful of scenarios. Amazingly, the Treasury, which has been weakened by the departure of senior staff, has predicted 5% growth for the year ahead.

Sounds impressive? That estimate reeks of ‘election economics’. Maybe the OECD has a more realistic term of reference. It believes that it will not be until 2022 that the economy will return to ‘normal‘.

The Bank of Israel has noted that the economy will have contracted by around 4.5% this year. Under the best of circumstances, unemployment will not be less than 8% by the end of 2021. (The current figure is about 20%, as furlough assistance actually encourages many to stay at home!). And government financial incentives are still determined by bureaucrats, which will keep the potential beneficiaries in long-term debt.

The key politicians in the spheres of health and economics are members of the Prime Minister’s Likud Party, which he totally controls. You do not see too many of these apparatchiks, walking around the streets of the main cities, being photographed outside the rows of shops that have shuttered up (or down).

To date, the electorate is repeatedly told by the PM that we are in a better position than other countries. Maybe encouraging, but hardly helpful when looking to pay your basic bills.

As we approach 2021, I do not find the current leadership of the country one that I can identify with, especially when it comes to core issues such as looking after my family’s health and finances.

Leading Israel into another election, but on to where?

25 November 2020
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Categories: Afternoon Tea in Jerusalem, Business, Israel

For the third time within a year, Binyamin Netanyahu claimed this March that he had won a phenomenal victory at the polls. And for the third time. he ended up forming a coalition that could not last.

Jump forward to November 2020 and we see the inevitable beginning of the end of the current Italian comedy. The difference this time is that Bibi, as the Israeli PM is affectionally known, has discarded so many former allies that next time round, they may be able to form a government without him. (This assumes that their hatred and distrust of him is enough to bind them together, despite their clashing egos).

Politics in Israel has been dominated this year by first and obviously how to handle covid-19, and secondly the sensational development of relations with Gulf States. Bibi has been at the forefront of both.

During the Spring, Bibi was seen on TV constantly. By May, he was claiming that covid-19 was under control and that society could start a process of normalisation. He had risen to the task.

The summer brought……… hot weather. Economic hardship set in, especially for the sectors not tied in to hightech. Over 20% unemployment, a fiasco over loans for small businesses, a government budget that has yet to be passed even today and a series of arrogant statements by Bibi’s supporters that appeared to play down the woes of the common people. As a second lockdown then kicked in, Bibi was no longer seen making Churchill-like appearances on the telly.

The Autumn brought a flood of good news from overseas. The UAE, Bahrain, Sudan and with assumedly more to come countries established diplomatic links with Israel. Nobody doubts that Bibi has led the way on this matter. Equally, nobody also doubts that he has kept this credit from his coalition partners (or enemies), who actually hold the important portfolios of Defense and also Foreign Affairs. They were kept in the dark on key developments.

Would you call this leadership in the time of corona?

We must not forget that underneath all of these events lies the volcano of Bibi’s trial next year. He has been indicted on three counts, and only an oversight in the constitution allows him to remain as Prime Minister. That is what drives nearly all of his decisions. And his need to cling to power is what will lead the country into another unwanted election.

What’s wrong with that? S&P recently confirmed Israel’s high credit rating. However, in interviews on the radio, the author of the report indicated that internal political uncertainty will soon jeopardise that position. It will cost the country more money to finance its growing debts.

So if Bibi has led Israel to this point, what can he deliver in the future? Despite the rhetoric, he is a man who neither unifies nor shows compassion. Is he a person with you can identify with, even if you disagree with his politics? Multiple opinion polls suggest not.

So what does Bibi have to offer the Israeli electorate in 2021, other than revelations from his trials? We wait to see.

Israel’s economy: How the government deserves a zero rating, despite some success

21 October 2020
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Categories: Afternoon Tea in Jerusalem, Blog, Business, Israel

Eight months into the Covid-19 crisis, and the Israeli government has yet to draw up a clear economic response paper to the crisis. As the country is leaving its second lockdown, we know that:

  • The economy imploded by over 10% in the first half of 2020.
  • In September, unemployment doubled within 30 days.
  • The shekel is still gaining against major currencies, ensuring that exports are less competitive.
  • And at least five senior officials at the Ministry of Finance have quit in protest at the incompetence of their political bosses.

A totally uninspiring scenario.

Yes, investment in hightech remains buoyant. The peace agreements with Gulf states are brining almost immediate economic benefits, at last for those at the top. The Israeli Prime Minister reminded his nation that the country is ahead of Europe, which is just heading into its ‘second wave’ of the virus.

But so what? The European Union is Israel’s second largest trading partner. It is facing the threat of what is known as ‘double dip recession‘. If so, this will further threaten the ability to buy goods and services from Israel.

Bibi Netanyahu was a Finance Minister, who helped to craft much of the success of the past two decades. Today, he is wedged between the impact of Covid-19, his preparation for three legal trials, and a political constellation that keeps him tied to an ultra-orthodox community that has little immediate interest in economic rejuvenation.

In other words, the Prime Minister has neither the time nor the ability nor the space to lead his country out of its economic mess. There is no “new plan” on offer. There are no suggestions to revamp city centres, which are turning into dustbowls, literally. People are still being paid to stay at home on furlough rather than giving the money the companies to re-employ them. Grants to businesses are still wrapped in confusing conditions and based on one factor and one factor only – did your revenues decrease by more than 25% in early 2020?

This is absolute nonsense. This is a leadership that has walked away from its electorate. This is unacceptable.

Nevertheless, it is amazing how some people have learnt to adapt and to pivot.

  • The clothing shop that offers a private VIP service.
  • A plastics factory that realised how shops and reception areas need screens
  • The bike store that has supplied dozens of home trainers.

None of these small business owners hung around, waiting for guidance from those who have been elected or promoted, because they are supposed to know better!

Is there hope? I leave with a piece of ingenuity from the younger generation. Four kids felt they were desperate for a burger and chips from McDonalds. However, the restaurant chain was only permitted to sell via drive-in takeaways.

Our heroes found some carton boxes and cut them into the shape of a car. With their new ‘attire’, they pulled up (so-to-speak) alongside the check out counter and dutifully ordered. Everyone was a winner and the government regulations were adhered to.

Well, it is easier to formulate regulations rather than dramatic new policies and provide hope for the future.

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