Amazon accelerates in Africa, much to the chagrin of local players

By Quentin Velluet
Posted on Wednesday, 24 August 2022 10:30

An Amazon parcel on the sorting centre's conveyor belt. © Arthur Nicholas Orchard / Hans Lucas via AFP.

In search of new growth levers, Amazon will launch its e-commerce platform in Nigeria and South Africa in 2023. On the ground, local players are struggling to find a balance.

Bad news for Konga, Jumia and Takealot. Nigeria and South Africa’s three e-commerce leaders are seeing Amazon’s ambitions grow in their own backyard. The US behemoth is planning to roll out its successful marketplace in the continent’s two largest economies.

Called “Project Fela”, the new plan of attack implemented by the group founded by Jeff Bezos and now headed by Andrew Jassy, also includes a new strategy for Amazon Web Services (AWS), the entity dedicated to data hosting services. The latter wants to focus more on start-ups in Nigeria. There are also plans to accelerate Prime Video, the US giant’s video streaming service.

In Lagos, Prime, which not only competes with its US rivals Netflix and Disney+ but also with local platforms such as Jason Njoku’s IrokoTV, has already launched a marketing campaign designed by the Nigerian agency Insight Publicis. The platform has also signed contracts and licences with production studios such as Anthill Studios and Inkblot Productions, as well as with television channels.

Diversification

Amazon has increased its focus on the African continent because it is looking for new sources of growth to offset the slowdown it experienced in the post-Covid-19 period. In the second quarter of 2022, following the deceleration trend already recorded in the first quarter, its profits fell to $3.3bn from $7.7bn during the same period last year. After diversifying into healthcare – Amazon bought One Medical in July for about $3.9bn – the group is now looking for new consumers in new markets.

In Africa, the US giant has until now given priority to its data hosting business. In April 2020, the world leader in cloud computing announced that it would be strengthening its existing infrastructure by creating a “region”, i.e. a grouping of several data centres in Cape Town, the birthplace of EC2, the product that helped make AWS the group’s first source of revenue.

The group, which is currently recruiting over 300 people in the country, has also decided to build its continental headquarters in the South African capital. The construction project, which represents an investment of nearly $300m, has nevertheless been at a standstill since 20 March due to the lawsuit brought by indigenous peoples against the local developer, Liesbeek Leisure Property Trust (LLPT). The association of various indigenous peoples believes that the future 60,000 square metres complex, which will be built on more than 14 hectares of land, encroaches on sacred lands.

On the e-commerce side, Amazon has so far only been present in Egypt since it bought the Emirati e-commerce site Souq.com in 2017 for $580m. Renamed Amazon.eg in 2021, the subsidiary has 28,000 square metres of offices in 10th of Ramadan, a new city located an hour from Cairo by car.

Local players struggling

In Nigeria, the future opening of its marketplace positions the US giant as a serious competitor to Jumia – which also competes with Amazon in Egypt – and Konga, which dominate the market but are struggling to achieve a balance. Present in 11 countries on the continent, Jumia generated $178m in revenue in 2021, with losses of $227m, and had eight million active users. These results are stable compared to 2019.

Konga, which was acquired in 2018 by the Nigerian computer manufacturer Zinox Technologies and is headed by Prince Nnamdi Ekeh (son of Leonard Stanley Nnamdi Ekeh, founder of Zinox and chairman of Konga), does not disclose its figures. In 2020, Nick Imudia, Konga’s former CEO, announced that he wanted to exceed $3.5bn in revenue by 2024. The company currently claims a valuation equivalent to $2bn, compared to less than $1bn for Jumia, which is listed on Wall Street.

In South Africa, Takealot, a subsidiary of the technology conglomerate Naspers headed by Mamongae Mahlare, is reporting near break-even results. For the year ended March 2022, the company recorded a 27% increase in revenue to $827m and a $6.54m loss.

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