MTN has sold all its stake in Jumia as an effort to streamline its portfolio and cut debt by disposing off non-core business. Proceeds from the sale valued at $142 million will be used to pay off debt. The Group announced the exit in its Quarter 3 results, where it also announced the localisation of its 8% shareholding in MTN Zambia, raising $12.6 million.
“As part of its asset realisation programme, MTN Group completed its exit from its 18,9% investment in e-commerce venture Jumia as well as the localisation of an 8% shareholding in MTN Zambia, realising net proceeds of approximately R2.3 billion and R204 million respectively,” reads the Group’s report.
The sale comes only six months after Rocket Internet, Jumia’s Parent company sold its 11% stake in the e-commerce for an undisclosed amount of proceeds. The sale was not a surprise given Jumia’s stock on the NYSE tanked after Citron Research claimed that the e-commerce company was a fraud, triggering a $5 million class-action suit.
MTN first announced plans to sell what Bloomberg says was $243 million interest in the e-commerce firm, after investing in the company since December 2013. A document by GSM shows that MTN, Millicom and Rocket Internet owned 33.3% of Jumia’s stock in December 2013. The Telco Group later topped up its investment by $143 million, pushing its stake to 41.4%.
Nevertheless, MTN Group will continue its partnership with Jumia in some markets.
“We are proud to have been a partner in the evolution of one of Africa’s pioneering online marketplace businesses and will continue our relationship with Jumia through ongoing operational partnerships in some markets.”
Jumia’s Turning Tide, Citron’s Change of Heart
It is also important to note that research from Citron shows a change in position regarding Jumia. A Citron report says that the pandemic, which “quickly shifted the purchasing habits of Africans and accelerated the acceptance of e-commerce in a economy that many including Citron questioned would be ready to accept a new way of doing business.” The acceptance of fintech, including JumiaPay, the e-commerce surge in Nigeria, and its renewed focus on profitability could reward patient investors.
Andrew Left, an editor at Citron research, told The Africa Report that, “I am positive on their outlook now that much of the fraud seems to be behind them. Nigeria obviously will not be the only country in the world not to embrace e-commerce.”
Jumia’s Quarter 2 results show that its losses fell by 44% YoY. It also shifted from electronics to fast-moving consumer goods, which increased gross profit per order after fulfilment of expenses to €0.90 up from €0.1 in 2020 Q1.
The company will announce its Quarter 3 results on November 9th.
