Investors in African e-commerce have to be prepared for short-term pain in order to make long-term gains. And 2017 was a rough year, with Nigerian online retailer Konga sacking two-thirds of its workforce and its Africa-focused rival Jumia reporting net working capital of negative €10.2m ($11.8m) and a big drop in earnings.
“For sure, the macroeconomic conditions were difficult for us in Nigeria, and the ones who have suffered the most are the sellers,” Franco-Canadian Sacha Poignonnec tells The Africa Report. “We built Jumia with the goal to give a platform for sellers to distribute their physical goods and services as well to the consumers, and we have 40,000 active vendors on the platform across Africa. And all of them are African businesses.”
Poignonnec believes that, for all the volatility, Jumia’s plans remain sound: “It’s a proven business. It’s an irreversible trend that consumers buy online.”
Buoyed by the success of Amazon in the US and Alibaba in China, investors are keen to be a part of a future African e-commerce story. Beyond that, Poignonnec argues that Jumia’s geographical diversification ensures that investors have kept faith and prevented the company story from playing out in the same way as Konga.
“A lot of time you meet investors who want to invest in Africa, but it’s difficult because a lot of companies are mono-country. And they are exposed to only one or two geographies,” he says, pointing to the 23 countries Jumia is now active in. “On Jumia you have a lot of different physical goods which touch a lot of different needs from the consumers, and we have, of course, all those online services around travel, restaurants, car classifieds, real-estate classifieds.”
It’s a proven business. It’s an irreversible trend that consumers buy online
Another differentiating factor is Jumia’s strategic investors: Orange, MTN and Millicom – telecom companies from France, South Africa and Luxembourg, respectively – and Axa, the French insurance giant. This allows for joint commercial operations bringing together different consumer bases. Axa insurance products, for example, are already available on Jumia’s sites.
“It makes us stronger and makes them stronger,” says Poignonnec, who wants to lean on their experience. “The telco industry in Africa did not exist 20 or 25 years ago, just like the e-commerce industry did not exist six years ago,” he adds. “In a way, what is happening today with e-commerce is a repeat of the history – an adoption of a new service.”
All that glitters is not gold, however. The financial technology revolution in Africa is “probably more blog articles” than an actual revolution, says Poignonnec. “It’s one thing to say I’m creating a wallet, but what’s the value for the consumer?” Nonetheless, Jumia has created the Jumia One app to allow customers to recharge airtime, pay utility bills and even make donations
to religious bodies and charities.
Poignonnec is a former employee of disgraced audit company Arthur Andersen – which went out of business after playing a role in the Enron scandal in 2002. So he has some perspective. “It was the most respected audit firm in the world, and in six months it was gone,” he says. “It really is a big lesson for me because I realised that nothing is forever.”
So if Jack Ma or Jeff Bezos knocked on Jumia’s door with an offer they could not refuse? “I’d be very proud that they take the time to travel to us and see it. Certainly we would have to think about it,” says Poignonnec.
This article first appeared in the November 2018 print edition of The Africa Report magazine
Understand Africa's tomorrow... today
We believe that Africa is poorly represented, and badly under-estimated. Beyond the vast opportunity manifest in African markets, we highlight people who make a difference; leaders turning the tide, youth driving change, and an indefatigable business community. That is what we believe will change the continent, and that is what we report on. With hard-hitting investigations, innovative analysis and deep dives into countries and sectors, The Africa Report delivers the insight you need.