By Mildred Kibaki

Africa is touted as the next frontier in global ecommerce on account of its growing youth population. But with serial losses being recorded by some of the ecommerce giants on the continent, particularly Jumia, market analysts foresee a dip in fortunes in the coming years.

Recent news from Kenya about Jumia hitting another loss is unsavoury. Jumia is usually used by most analysts to benchmark the continent’s ecommerce strength, largely because Jumia has a wider spread in Africa, operating in over 10 nations. Even this attempt at continent-wide spread tend to be Jumia’s undoing. Experts point to the Amazon and Alibaba models of expansion as the ideal, and a template Africa ecommerce houses should copy.

This model is simple: Get a primary market, grow big and strong in your primary market before creating other markets. Amazon had to claw deepest into US market as Alibaba did in China before spreading beyond their original turfs. Jumia does not seem to understand this model. As it stands, it’s hard to put a finger at Jumia’s primary market. While some market watchers put it as Nigeria, indicators from Africa’s most populous nation show that Jumia is also struggling in Nigeria as it is Kenya, Egypt and elsewhere.

Despite revenue from ecommerce in Africa hitting about $37 billion in 2022, an increase from about $13 billion in 2017, if the serial losses recorded by Jumia and others continue, it might create a pall of doubt about profitability of the Africa ecommerce market.

The latest report from Kenya about Jumia’s financials and profitability prospects only helps to further the argument that Africa ecommerce might not be as impressive as it appears.

Here is a brief summary of the run of Jumia in Kenya. Jumia Kenya recorded $87.8 million (KSh 11.6 billion) loss in nearly nine months since it set its foot in the East Africa country in May 2013.

Jumia’s net loss has been on the ascendancy over the years. In 2019, the company reported a loss of $72.7 million (KSh 9.7 billion), signalling a consecutive decrease in its revenue.

The run of losses increased by $9 million (KSh 1.2 billion) in 2021, up from $78.8 million (KSh 10.6 billion) reported in 2020.

Analysts say Jumia has one or two lessons to learn from the streak of misfortunes that has trailed it in Africa and in the United States where its listing on the New York Stock Exchange (NYSE) in 2019 exposed some unethical reporting in its operational records for which a class action was to be instituted against the company before it settled out of court.

Jumia is banking on the expertise of the newly appointed CEO, Charles Ballard, who has promised to spearhead the company’s coverage to more than 70% of rural areas in Kenya. Ballard took over from Juan Seco, who has served the company for eight years.

Ballard has the experience and expertise but how far he can go to repair a broken Jumia remains to be seen. He may need to pry into the management book of Konga, another ecommerce giant from Nigeria with strong global partnerships. In Nigeria, Konga seems to understand the market better than Jumia. Konga invested heavily in infrastructure, focusing on building smarter payment system, seamless last mile distribution network, and skilled-up human capital. Additional channels like Konga Travels and Konga Health have also helped to draw traffic to Konga. Jumia may need to understudy the Konga model which seems to have in-built efficiency for the African and global markets.

Jumia’s story is following a particular pattern. The pan-African e-commerce company though registered in Germany but operates in Africa with Nigeria as its biggest market was accused by US authorities in 2019 of many infractions including that:

(i) Jumia had materially overstated its active customers and active merchants;

(ii) Its representations about its orders, order cancellations, undelivered orders and returned orders lacked a sufficient factual basis and materially overstated the company’s sales;

(iii) Jumia failed to sufficiently disclose related party transactions; and

(iv) Jumia’s financial statements were presented in violation of applicable accounting standards.

On or about April 12, 2019, Jumia sold 13.5 million shares of stock in its initial public offering (the “IPO”), at $14.50 per share raising $196 million in new capital at the New York Stock Exchange to the delight of many Africans. However, as at Monday, April 24, 2023, the share price has crashed to $2.83. While this is not peculiar to Jumia, the headwind against the pan-African ecommerce company gets more vicious with time.

Jumia’s founders have left, over 1000 staff sacked (the company reports 900 staff), and there are fears that it is running out of operational capital. Some ecommerce insiders project that Jumia’s current capital strength may not take it beyond 12 months. This is compounded by the reality that in the global economy these days, investors are shying away from investing in start-ups, especially Africa start-ups.

And yet another tragedy: Jumia’s listing at NYSE, though a feat, turned ugly as it exposed Jumia as an e-commerce company with little regard for corporate governance.

Trouble started when on May 9, 2019, Citron Research, a reputable firm with a history of in-depth research in stock markets and investments, published a report accusing Jumia of overstating certain financial metrics in its April 2019 IPO prospectus and omitting adverse information about the number of returned, undelivered, or canceled orders from the prospectus.

On the strength of this information, Jumia’s share price fell by $6.22 per share, approximately 18.8%. The investing public, mostly Americans, felt conned by an African ‘smart’ company.

This prompted Kirby McInerney LLP to put out a notice to concerned shareholders to fill out a contact form which it aggregated to push for the rights or interests of the shareholders at no cost to the investors. At the end, Jumia opted for out-of-court settlement in the ensuing class action. It paid out $5 million in settlement.

US market analysts said that the case of Jumia dented the image of Africa, insisting that it cast a huge doubt on the chances of tech startups from Africa being trusted on their face value by international investors. To them, the action of Jumia deserved to be probed and the company sanctioned by relevant authorities in Africa, particularly Nigeria where it has its highest market.

Many tech startups are sprouting out of Africa namely – PiggyVest, Andela, Opay (Nigeria); Sokowatch, Lendable, M-Kopa (Kenya) and Jumo, Aerobotics, MFS Africa (South Africa). They are part of the over 4,000 tech startups in the three most advanced ICT-savvy countries on the continent. While many of them desire to go international, get listed at major international stock markets, they are bogged down and haunted by the nasty image Jumia presented to US investors for which they demand punishment by African securities and exchange commissions. At this juncture, Jumia may begin to look for new partnerships, and even a new identity to burnish its image. It may also need to review its strategy and adopt smarter, leaner ways to stay afloat in a feisty ecommerce market. Not to make any move is to keep digging more holes in its pocket.

Ms Kibaki, an investment advisor, is based in Nairobi