Africa’s biggest e-commerce retailer goes live on Wall Street today. Despite it being the week that Uber is set to also have its Initial public offering (IPO), it is the jewel of Africa that investors need to pay attention to as it has trailblazed a path and created a business in a market which international giants have headaches and failed to gain momentum. So, what makes this company special?
“As a headline, retail investors specifically are going to say ‘that sounds like the future’ [but] institutional investors will be a lot more discerning beyond just the headline,” says Kevin Carter, founder of EMQQ, an Oklahoma City-based exchange-traded fund focused on internet and e-commerce companies in emerging markets. EMQQ’s holdings currently include Naspers, Tencent and Alibaba.
1. First African Unicorn Valued Over $1 billion
In 2016, on safari for the rare African tech unicorn, Goldman Sachs Group Inc. and other big-name investors spotted a winner in JUMIA, the continent’s fastest growing e-commerce company. Until then, no private tech venture based in Africa had obtained that trophy. In its most recent round of funding, AIG (as JUMIA was formerly known) was valued around $1.1 billion with fresh funding from Goldman Sachs, Rocket Internet (AIG’s parent company) and MTN Group, South Africa-based telecommunications firm. When Goldman Sachs committed its investments, it earmarked it for JUMIA, which was considered to be the gem of AIG’s portfolio.
2. Won 2013 Best Retail Launch of the Year Award
Founded in 2012 by Jeremy Hodara and Sacha Poignonnec, ex McKinsey consultants, along with Tunde Kehinde and Raphael Kofi Afaedor, JUMIA was the first African company to win the prestigious World Retail Congress award. The World Retail Congress’s jury said JUMIA had set the highest benchmark when it comes to retailing in Africa: their excellence in online marketing, IT and operations are key drivers for JUMIA’s sharp growth rates and the company’s rising brand awareness throughout the whole of Africa. It has reached a total of 4 million daily users across all its African markets. Tunde Kehinde, former co-founder and managing director at JUMIA was quoted in an interview with Techpoint back in 2015 recalling how the company started with only five people in a “very tiny room” and describing how the company had now grown to ship thousands of items around Nigeria.
3. Its 50 employees have established 15 Start-ups
Innovation was at the core of the founding team and early members of the JUMIA team. Between 2012 when JUMIA started and early 2013, it grew from five to about 50 people. According to Techpoint Africa, someone made a list of JUMIA’s first 50 employees; they suspect it was Olaoluwa Samuel-Biyi, ex JUMIA employee and Director, SureGroup. All 50 of them have gone on to either hold senior management positions at the top of their fields or build their own companies. Some of the popular names you may recognise are Tunde Kehinde and Ercin Eksin of Africa Courier Express (ACE) and Lidya, Onyeka Akumah of FarmCrowdy, Omobolanle Shodipo of the Africa Union and music superstar Adekunle Gold. In all, 15 start-ups/companies came out from JUMIA’s pioneering team.
4. JUMIA operates in 14 African Countries and is targeting growth
As it competes across 14 African countries including Nigeria, Kenya, Morocco and Egypt, JUMIA also faces uneven growth in “fragmented” markets with “largely underdeveloped logistics, delivery, and digital payment landscapes.” JUMIA has also proved to be an adaptable entity that pays special attention to the environment in which it is operating. Moist ecommerce giants have been deterred from Africa because of lack of adequate infrastructure, yet for JUMIA, it has found solutions in the bleakest of circumstances. For instance, faced with low consumer confidence in online payment solutions, JUMIA designed a payment-on-delivery system. In Kenya, 96% of the sales made used the sales-on-delivery system. While there are current doubts over the size of the addressable market for e-commerce companies across Africa, JUMIA’s is likely betting on rising internet access, cheaper smartphones, higher rates of financial inclusion and an increasingly young demographic in its major African markets to fuel sustained adoption—and growth—of e-commerce. The company stands to be one of the greatest beneficiaries of the Africa Continental Free Trade Area when it comes into effect offering greater market consolidation and easier flow of goods across Africa.
5. The company will list with a value of $1.3 billion
Now to the all-important IPO happening today in New York. JUMIA has set a price range of $13 to $16 per share ahead of an initial public offering (IPO) on the New York Stock Exchange (NYSE). The online retailer will offer 13.5 million American depository shares for purchase, according to an updated version of its IPO filing with US regulators, and could raise as much as $216 million, depending on investors’ appetite. If traded at the mid-point of that price range, for instance, JUMIA’s valuation will be pegged around $1.1 billion. The listing was delayed by a day as the company released more figure which it considered important for investors interested in the stock. It was also a good delay as it avoided the listing coinciding with the listing of Uber which is expected to be the year’s biggest IPO. Several risk factors were highlighted in the company’s SI filings which also highlighted its losses. However, the losses will not be paid much attention to as two headline listings, Uber and Lyft, have also lost money in past years.