Start-up to unicorn
Some years ago, I attended a retail conference where one of the speakers told anecdotes of how his company was navigating Africa’s infrastructure bottlenecks. He said scooters were the most adept in making deliveries in notoriously chaotic cities like Lagos and as most neighbourhoods didn’t have numbered address grids, drivers asked customers to direct them to their houses over their cellphones.
These were, for all intents and purposes, bespoke solutions to the structural challenges many African cities present. Providing tailored solutions is key to cash in on the continent’s ecommerce boom, he said, noting how most customers were paying cash on delivery because very few of them had credit or debit cards, and many who did were afraid of being scammed. The speaker was Sacha Poignonnec, a former Mckinsey consultant, who co-founded a company called Jumia.
It’s come a long way since then. Jumia now accepts mobile money payments and is starting to use drones to deliver goods. Oh, and it listed in New York last week. With its public offering, Jumia became the first
African start-up to list on a major global exchange.
Already, I can hear the purists tuttutting. Is it really African if it was founded by two Frenchmen, is registered as a German company and has its headquarters in Dubai?
The important thing to remember is this: in the 14 African countries it operates in, it is positioned to benefit from the increased adoption of ecommerce because essentially, it has been the first player in the market.
Remember that commercial trading in African countries has long been through informal channels such as markets, or those stalls on the side of the road. Unlike more mature markets such as the UK or the US, online shopping is still at a nascent stage across Africa.
The potential is there, though. Mckinsey predicts that by 2025 Africans could be buying $75bn worth of goods and services online annually. The main Jumia website sells everything from sneakers to blenders and there is even a hotel and flight booking site, as well as a takeaway food delivery platform.
In Kenya, Jumia has a tie-up with French supermarket giant Carrefour to offer online deliveries.
e:
African unicorn
The company, backed by Berlin-based accelerator fund Rocket Internet, priced its IPO at $14.50, raising nearly $200m and valuing the company at $1.1bn. The shares closed up 75% at $25.46. Not too shabby, then.
Jumia’s largest shareholder is MTN, which is reportedly looking to either offload or sell down its 29.7% stake (worth something like R10.2bn). Analysts say the cash could be used to reduce debt. More recent investors include Pernod Ricard and Mastercard. Jumia’s growth has been rapid.
But like other unicorns — a recently launched company valued at $1bnplus — it isn’t profitable. The company made a loss of €170.4m in 2018, and a loss of more than €165.4m in 2017. It’s holding the faith that increased smartphone use and broadband penetration will drive growth.
It will be interesting to see what MTN does with its stake. Bar Shoprite, no other SA company has benefited more from the narrative of Africa’s growing consumer class than MTN. Its sea of yellow umbrellas sprang up in shanty towns across the continent, long before anyone else had the guts to venture out there.