Why Jumia Is Beating Amazon And Alibaba In Africa

It’s been dubbed the
“Amazon of Africa”. It’s Africa’s largest e-commerce operator,
surpassing Amazon and China’s Alibaba, and it’s the first African tech
startup to go public on the New York Stock Exchange. Investors had high hopes for Jumia when
it went public on April 12th, 2019. Stocks skyrocketed at first, but
then quickly tumbled on the heels of criticism. This is a fraud being
played on the U.S. marketplace. People started questioning Jumia’s Africans,
too, due to the company’s largely European leadership
and shareholders. We are completely African company. Now, Jumia is adjusting to its
international status and figuring out what that status means for
the African continent. There is an Africa ecosystem that has
developed off the back of the creation of this thing. Jumia was founded in 2012 by Sacha
Poignonnec and Jeremy Hodara, who were both former employees of the
American worldwide management consulting firm McKinsey and Company. Jumia offers customers the ability to
buy products online, like phones and shoes, as well as groceries, flights,
food delivery, and offers bill paying and cellular data recharging. The company sought to build an
online shopping experience, among other digital products that could work
well with Africa’s sometimes ineffective infrastructure. If I said, “you know what, 42nd Street
on 3rd Avenue, I’ll be on the corner waiting for,” you know
exactly where we’ll meet. You can’t do that in Africa. The streets aren’t as signposted. You don’t know the geography, especially
when you think of outside the major cities. In other cases, Jamia cites a
lack of online shopping experience from users. When we ask the people who have
never used online shopping yet, the reason why, the number one reason which comes up
is, “I don’t know how to shop online.” That’s why it was so important to
make sure Jamila addressed its specific user base, and wasn’t just a
cut-and-paste copy of Amazon or Alibaba. Alibaba serviced 4.2 million African customers through its
AliExpress service since it entered the continent. Jumia serviced 4.3 million users and 81,000 active sellers
in the 14 countries it services since it started. Let’s take something that works in the
West, throw it into Africa and see if it works. If it works, we’ll throw money at it. If it doesn’t work, we’ll
kill it very quickly. That strategy for me was fundamentally
flawed anyway, because I believe, you know, anything emanating from an
ecosystem should be solving a problem that is consistent with. Amazon is technically available in 11
countries on the African continent. But neither Amazon nor Alibaba have
the benefit of starting and completely focusing on African countries. Jumia, for example, offers unique features
like pay on delivery, and that piqued the interest of U.S. investors. Everybody’s been looking for
an African unicorn. We’ve all been looking, you know, I’ve
been in this, in the angel business for about a decade now, and all of
us are looking for that, you know, something that validates
the African experience. When Jumia went public on the New York
Stock Exchange, it had a lot of promise. Its stock prices rose 75.6 percent on its first day and
held a market cap of $3.9 billion. And even though it had about
$1 billion in losses at the time, the prospective shareholders
were forgiving. The U.S. was excited to have the opportunity to
buy into the first African tech startup on the New
York Stock Exchange. All of a sudden, here is somebody
coming and say, “guess what, guys, we’ve cracked Africa. You know, we’re
making money gangbusters. This is it.” You know, everybody got excited because
we all want Africa to win. Everybody wants Africa at the table. But the attention Juma was
getting in the U.S. exposed some of its problems. We have no doubt at Citron that
this report that we’ve issued and the supporting documentation will soon be used as
evidence by the FTC in a case against Jumia. In May of 2019, Jumia came under
fire from Citron Research, a stock commentary website run by short seller
Andrew left for what Citron claimed was securities fraud and discrepancies
in its reported key financial metrics. What we learned about Julia is best summed
up in one email that was sent to us from a former executive. And what does he state to us? That Jumia is clearly lying
about every reported number. The report released by Citron brought Jumia’s
stock down over 40 percent in two days, and Citron isn’t the only
entity to raise its eyebrows at Jumia. To be honest with you, there are quite
a number, and I’ve met a few myself, of disgruntled Jumia employees
floating around there. You know, you look at some of
the reporting, there’s some credibility, but I think it’s overhyped. That’s just a personal view. But there’s, there is
no smoke without fire. Jumia is culpable on
some of those things. That is my personal opinion. Jumia Nigeria’s CEO, Juliet Anammah responded
on CNBC Africa to the accusations. This is taken, selected, biased and in
some cases unverified facts with a clear, you know, possibly the intent
of damaging the brand and profiting from it. Citigroup, one of Jumia’s is IPO
leaders released a report debunking most of Citron’s allegations, but noting that,
“Jumia could do more to provide disclosure on some aspects of its
operations as a matter of transparency and best practice.” But it wasn’t just this
scathing report that hurt Jumia. Soon after it went public. The hashtag Jamia is
not African gained popularity. Commenting on the company’s
largely European involvement. Jumia is a German company. Okay? So it’s paying its taxes in
Germany, where the founders and most of the shareholding is based
except for MTN. Its CEOs, which is irrelevant to
the argument, are actually of French origin. Its development team, it’s after
all a tech company, its development team is actually in
Portugal, which is in Europe. Its headquarters is in Dubai. But Jumia CEO Sacha Poignonnec
says Jumia is a. completely African company. We operate exclusively in Africa. We have more than
5,000 employees in Africa. And as you point out… But those are the
warehouses, not the engineers. The reality is in Africa, there’s
not enough development and developers, for example, and we know that and
we need to collectively, the startups and the VCs and everyone, address
that because everything should be in Africa. This is what we want, and
it shouldn’t be like this one day. We need to work on that. It’s not going to happen overnight, but
this is something we have to do, for sure. But Jumia’s African-ness this is not
as critical to some. Despite the company’s offshore management, Jumia has
kickstarted a wave of new startups created by
former Jumia employees. It has grown Africans to the point
where we are now creating companies because of that experience. And that can only be good. We now have our Jumia mafia, just
like you’ve got the PayPal mafia. And that’s what I look at
is what has it created. Jumia has certainly made a big splash
on the New York Stock Exchange, but the bigger impact was
on the African continent. I think the focus and the emphasis has
been too much on Jumia as IPO and all of that. There is an Africa ecosystem that has
developed off the back of the creation of this thing.

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