Starts Speaking up of Startups in Africa

COVID-19 induced a global eCommerce boom, but Africa accounted for less than 3% of eCommerce activity

Are these efforts going to increase the use of Information Communication Technologies and develop broadband penetration in Africa?

Will technology increase the divide or help to integrate Africa?

What are the Destiny and the Reality of the Technology in the Rest of Africa

How really and how much the building of such digital infrastructure can augment economic productivity and GDP growth?

French Speaking Startups in Africa:
Here is a sneak peek at l’Afrique Excelle’s 10 most promising francophone African startups – May 06, 2019

  • Diool (Fintech), Cameroon
  • Eyone (Healthtech), Senegal, Ivory Coast, Mali, Niger
  • Firefly Media (Adtech, Transport), Senegal
  • GiftedMom (Healthtech), Cameroon, Ivory Coast
  • LAfricaMobile (Connectivity, SaaS, API), Senegal, Niger, Mali, Ivory Coast, Guinea, Burkina Faso
Is the wider penetration of communication technology can benefit the real development of Africa while enhancing social inclusion?
  • Paps (Logistics), Senegal, Burkina Faso, Ivory Coast
  • Solaris Offgrid (Fintech, SaaS, Solar), Benin, Burkina Faso, Senegal, Cameroon, Rwanda

The Clouded Bright-Side of Africa Startup & Tech Hubs Financed from Overseas

Africa is still very early in the retail transition to e-commerce, and there’s opportunity but also very real risk.  Jumia Technologies is a low-margin, cash-burning e-commerce marketplace that has been making losses since its inception.

JUMIA – is not Amazon of Africa and can be just another foreign Ad-venture Lost in the Safari

Jumia is billed as Africa’s first “tech unicorn”, a venture-capital funded company valued at more than $1bn on the New York Stock Exchange. Its lack of a profitable model didn’t seem to matter much on the first day of trading on Friday, as the stock surged by 75%.

Morgan Stanley, Citigroup, Berenberg, RBC, Raymond James, Stifel and William Blair were underwriters on the deal

Initially valued at $1.1 billion, Jumia was the first Africa-focused start-up to earn a unicorn valuation and list on the New York Stock Exchange. Although initially well received, things quickly went downhill for the e-commerce platform.  Jumia is an e-commerce retail platform and logistics service that connects sellers with consumers. It currently has a presence in 11 African countries but this account is shrinking given the difficulties encountered by Jumia in serving such diversified and unpredictable distant and disseminated marketplaces and isolated territories.

Jumia is an online marketplace for electronics, and fashion among others targeting several African countries. Wikipedia

Jumia in New York

Stock priceJMIA (NYSE) $17.75 +0.25 (+1.43%) – Oct 5, 1:18 PM EDT – 


Founded: 2012, Lagos, Nigeria

Headquarters: Berlin, Germany

Number of employees: 5100

CEOSacha Poignonnec (2012–), Jeremy Hodara (2012–)

FoundersSacha PoignonnecRaphael Kofi AfaedorTunde Kehinde

Parent organizationRocket Internet

Starting in Nigeria, the company created many of the components for its digital sales operations. This includes its JumiaPay payment platform and a delivery service of trucks and motorbikes that have become ubiquitous with the Lagos landscape. Jumia has extended this infrastructure as an e-commerce fulfillment product called Jumia Services.

Jumia’s original co-founders included Nigerian tech entrepreneurs Tunde Kehinde and Raphael Afaedor, but both departed in 2015 to form other startups in fintech and logistics.

The parent for Jumia Group is incorporated in Germany and current CEOs Jeremy Hodara and Sacha Poignonnec are French. Jumia is headquartered in Berlin, Germany. Shareholders include the Berlin-based incubator and venture-capital firm Rocket Internet SE, which helped the company with its founding and owns a 20.6% stake. South African company Mobile Telephone Networks Holdings Ltd. owns a 29.7% stake. Other early investors include French insurer Axa CS, +0.66%  and French telecoms company Orange SA ORA, -0.07%  

Jumia in Morocco

In keeping with German regulations, Jumia has a dual-board system: a management board and a supervisory board. The management board, which is responsible for day-to-day operations, comprises Jeremy Hodara and Sacha Poingnonnec, co-founders of the company who have served as co-chief executives since 2012. Both were employed at McKinsey & Co. before launching Jumia.

Despite all these depressing signs and factors, the listing and the valuation of Jumia stocks can be considered as an investment in Research and Development about the African E commerce market and the shape of its strengths or weakness. Within such consideration, the share price connected to NYSE ticker sign JMIA could reflect not just investor confidence in Jumia, but investor confidence in African e-commerce overall.

Between Family Transportation System and Jumia Delivery

Enonchong says African e-commerce is a very difficult and expensive market to get into. While Western e-commerce rests on the assumption that the post office will deliver to all points, that is often not the case in Africa. “You have to build your own distribution network.”

Other e-commerce operations have crashed and burned, including:

  • Jumia’s Nigerian rival Konga, which was taken over by Zinox Technologies in 2018 after firing 60% of its staff in 2017;
  • CFAO, the francophone Africa distributor, which suspended its online “Africashop”;
  • Naspers, which has twice withdrawn from the Kenyan market.

What African credentials? Jumia – African Startup or Global Startup

This image has an empty alt attribute; its file name is JUMIA-NYSE-IPO-433x325.jpg

Jumia is registered in Germany, has its headquarters in Dubai and its technical development in Portugal.

Jumia’s first-day performance tells us little about the fundamentals of investing in African e-commerce. Investors who want long-term exposure in African tech should wait for the outcome of MTN’s tax dispute in Nigeria.

5 things about newly-public African e-commerce site Jumia

The company has never made a profit

Jumia generates most of its revenue from commissions from third-party sellers. Since its founding, the revenue the company has generated has not been enough to cover operating expenses, with losses in 2018 totaling €170.7 million. Accumulated losses as of Dec. 31, 2018 totaled €862.0 million.

Gross merchandise volume in 2018 was 828.2 million euros, or about $938.0 million, up from €507.1 million the previous year. Revenue for the year was €130.6 million, or about $147.9 million, up from €94.0 million the year before.

“We expect that our operating expenses will continue to increase as we intend to expend substantial financial and other resources on acquiring and retaining sellers and consumers, growing and maintaining our technology infrastructure and sales and marketing efforts and conducting general administrative tasks associated with our business, including expenses related to being a public company,” Jumia said.

It has no plans to pay a dividend ‘in the foreseeable future’

Like many newly public companies, Jumia is not planning to pay a dividend any time soon, which means investors must rely on stock price appreciation for returns.

“We intend to retain all available funds and any future earnings to fund the development and expansion of our business,” the prospectus said.

Most of the goods sold on Jumia come from third-party sellers

About 90% of the items sold on Jumia in 2018 came from third-party sellers, which puts the onus for housing inventory on those sellers, but also puts the company at risk of any issues that the third-party might engage in, like fraud.

Jumia sells the other 10% of items directly “in order to enhance consumer experience in key categories and regions.”

Jumia Logistics provides delivery and pickup via a network of leased warehouses and drop-off stations, and, in certain markets, Jumia has its own delivery fleet. In 2018, the company handled 13.4 million packages.

JumiaPay and Jumia One help with online transactions and payments on a continent that still relies heavily on cash. More than half (54%) of the orders placed in Nigeria and Egypt during the fourth quarter were completed with JumiaPay. That may become part of the business in the future.

“As of the date of this prospectus, we do not monetize our payment services,” the company wrote. “In the future, we may decide to do so, including opening up our payment services to third parties.”

Jumia operates in markets that are underdeveloped and politically unstable

Jumia is operating in emerging African markets that are still developing logistics, delivery and digital payment capabilities. Delivery can be too expensive or too time-consuming to compete with traditional retailers, and cashless payment is challenging.

In addition, some of its markets, such as Egypt, still experience periods of political instability. Governments have a history of making dramatic policy changes, such as price controls, currency devaluations, or mandatory wage increases.

Terrorism and violent crime is also a risk, which could restrict delivery and fulfillment. In 2018, Jumia said one of its warehouses in Kenya was robbed of about €500,000 worth of merchandise. Boko Haram could pose a threat in Nigeria, where it has disrupted the economy in the northeast of the country. And al-Shabaab, a Somalia-based terrorist group, executed an attack in Nairobi in January, posing a potential problem for Kenya.

It has to contend with failed deliveries and late collections

Many customers, including those that don’t have a bank account or don’t trust online payments, choose to pay upon delivery. The customer has to be home to accept the package. Failure to complete a delivery is a continuing problem, with 14.4% of GMV in 2018 either a failed delivery or return. Delivery verification is also a problem.

“For example, in Kenya, where approximately 95% of our consumers paid in cash or with cash equivalents on delivery in 2016, we discovered in early 2018 that €720,000 of cash payments remained uncollected in 2016, the large majority of which was never subsequently collected,” the prospectus said.

Douala DownFall for Jumia Extended to Kinshasa: From the Peak of the Atlas to the Steppes of Katanga: Jumia’s Pretense and the Reality of Ecommerce in Africa

The struggle is very real for + as its third-quarter results missed revenue estimates for the second time in three quarters since becoming a publicly traded company. At the end of 2018 the e-commerce firm loss $977 million. Investor appetite remains questionable considering the company’s persistent financial losses in its core markets.

“We came to the conclusion that our transactional portal as it is run today is not suitable to the current context in Cameroon,” Jumia said in a statement. 

Jumia’s third-quarter earnings comes amid a months-long share tumble on the New York Stock Exchange which has seen it lose its unicorn status. Its stock has fallen from a post-IPO peak of $49.77 which saw it valued at nearly $4 billion to a current price of $5.75 (at 3.15pm eastern time yesterday) and a market cap of less than $470 million. The stock price has dipped 13% since trading began today in the wake of the earnings call.

On Monday [2/24/2020], Jumia Technologies AG – ADRNYSE: JMIA 5.56 USD −0.31 (5.28%) Feb 24, 9:59 AM EST ·

Jumia recently ended operations in Rwanda and divested its hotel and flight service, Jumia Travel, to a South African partner. While these divestments may buy time for Jumia to rework its business model, investors should avoid the tech stock until the company’s long-term vision becomes clearer. 

A Jumia warehouse with a truck in front

Picture of JUMIA in Morocco

The situation reached a head in May 2019 when short-seller Andrew Left of Citron Research published a scathing report alleging fraud on Jumia’s marketplace. Citron claimed to have obtained a confidential presentation from October 2018 that showed material discrepancies with the information Jumia reported to the SEC in its IPO filing. The short-seller accused Jumia of inflating active user numbers and pointed out the massive amount of deliveries that were being returned, canceled, or not delivered. 

In August, the company responded in its second-quarter earnings report:

“As disclosed in our prospectus dated April 11, 2019, we received information alleging that some of our independent sales consultants, members of our JForce program in Nigeria, may have engaged in improper sales practices. In response, we launched a review of sales practices covering all our countries of operation and data from January 1, 2017, to June 30, 2019.”

But fraud allegations aren’t the only problem at Jumia. The firm’s core e-commerce operations seem to be in trouble. 

Lower quality customers and higher losses

The third-quarter earnings report revealed that while annual active consumers grew by 56%, average order value fell 29%. This trend suggests that while Jumia’s marketplace is still growing at an impressive rate, it may be attracting lower-quality customers.

More evidence for Jumia’s declining customer value can be found in Jumia’s fulfillment expense — which rose 55% quarter-over-quarter due to a higher proportion of orders shipped from overseas and/or delivered to locations outside of primary cities. Meanwhile, losses continue to mount, increasing to 54.6 million euros from 40.6 million euros quarter over quarter. 

DHL is expanding its DHL Africa eShop business to 9 additional markets, upping the presence of the global shipping company’s e-commerce platform to 20 African countries.

DHL went live with the digital retail app in April 2019, bringing more than 200 U.S. and U.K. sellers — from Neiman Marcus to Carters — online to African consumers. Africa eShop operates using startup’s white label fulfillment service, Link Commerce. Payment methods include local fintech options, such as Nigeria’s Paga and Kenya’s M-Pesa.

DHL’s move to offer Africa eShop to 20 of the continent’s 54 countries comes a month after Africa’s most visible (and well-funded) e-tailer, Jumia, went public.

The report revealed impressive performance in JumiaPay, the company’s payment processor which management hopes to eventually develop into a stand-alone entity. The fintech offering grew by 95% in total payment volume and 262% in total transaction volume. 

Jumia seems to be consolidating its business in an attempt to stem losses and pivot to its more promising JumiaPay platform. 

Jumia announced plans to suspend on-demand food delivery in Rwanda and close all customer accounts on Dec. 9, 2019. This comes not long after its retreat from Tanzania and Cameroon. The company is also divesting Jumia Travel, its hotel and flight service, to Travelstart for an undisclosed amount. 

When the divestments go through, Jumia will operate in only 11 countries, down from 14 at the time of its IPO. While these divestments will hurt revenue growth in the short-term, they may improve margins and buy time for Jumia to focus on developing JumiaPay. 

Right now, JumiaPay is active in six countries, including Nigeria and Egypt — the company’s largest markets in terms of GDP and population size.

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