Last week, e-commerce company Jumia had its IPO on the New York Stock Exchange. The IPO saw the company offer 13.5 million shares thus raising $196 million at $14.50 per share. On the first day of trading, the stock rallied 75% closing at $25.46 a pop.
This was quite impressive. Until it wasn’t for some on the continent.
I am personally thrilled that a company whose main and only operations are on the African continent has listed on the NYSE. The internet is not exactly amused and the thorn is the question of just how AfricanJumia is. This stems from two issues. First, the company was founded by a bunch of French dudes. Its headquarters are in Germany, likely because of Rocket Internet, the investment fund that pumped millions of dollars in Jumia pre-IPO. Its technology team sits in Portugal and only the ‘non-core functions’ and customers are in Africa. The second issue stems from a misguided comment that the company’s CEO made in an interview on CNBC, implying that Africa lacks a critical mass of developers capable of working at Jumia hence the decision to have tech ops sitting in Europe.
I think the second comment is inaccurate. Africa does indeed have developers, equally skilled and this number keeps growing thanks to efforts by companies like Andela, Africa’s Talking and Moringa School, to name a few who are working to upskill developers or avail infrastructure to build scalable businesses. Indeed, there may be challenges with senior developers, capable of leading teams and building high-level technology but quick and substantive gains are being made mostly by returnees who have worked in big tech lending their hands in fast-growing technology companies on the continent.
I choose to see the first issue from a different light, which my compadres have called ‘elitist’. I think much of what is being raised is indeed valid but filled with faux outrage. Companies with African founders face challenges raising huge amounts of funding despite having valid business models, recurring revenues and otherwise. This is no secret. That, however, does not warrant us looking down on a ‘pioneer’. In my opinion, Jumia listing is a great thing not just for technology companies working on the continent but for African firms.
A recurring issue has been a mismatch on both the demand and supply side with investments. On one side, you have VCs and fund managers seeking out alpha on the continent, which they seemingly cannot find. Blackstone recently shut down its Africa facing operations, as so did PE powerhouse KKR who could not find big enough deals to invest in on the continent. Those with skin in the game further complain about the lack of exit options.
On the other hand, you have great African companies, solving complex problems from logistics, retail, infrastructure to healthcare that cannot quite marshall those big ticket size investments like their peers in the Western world would easily gather.
Jumia was a heavily funded company despite having cumulative losses nearing a billion dollars as it embarked to solve the problem of informal retail. I feel Jumia’s IPO solves this inefficiency. A mix of big-time exits for the owners of capital means they will get aggressive with the market, seeking out deals, allowing them to spew more cash into local companies, thus allowing those firms to grow and scale faster. Capital is a huge challenge for a business looking to deal with 55 regulators, 55 different clusters of customers and only deep pockets can solve this wahala. This deal means we can see more blockbuster deals like we did with Branch and Andela recently as there are multiple ways to cash out. It would be great to have another 20 Jumias on the continent, with multi-millionaire founders, thousands of jobs created and overall growth of the economy.
A key but often underlooked aspect of Jumia is the ecosystem it has created around its offering. Thousands of merchants, previously offline or operating in fragmented internet spaces such as social network channels, finally have structured environments through which they can sell their wares. I can speak of a businessman in downtown Nairobi who sells electronic goods on Jumia specifically, and who has seen his business grow 6 fold over the last 24 months due to orders from the platform. Beyond this, Jumia outsources a large chunk of their services, which has seen a bunch of tech-enabled logistics firms, payments companies and others come up to serve these needs. These and other touchpoints show how expansive the company’s tentacles have been. It obviously has had a knock-on effect on the developer ecosystem in the continent. Working with new global technology standards, solving infrastructure problems at scale for companies in logistics and payments, as well as exposure to continent-wide markets makes our developers better. They will one day soon have their own Jumias at best or lead tech teams at a scale.
Overall, I feel the yardstick in judging this company should mainly focus on how well it is serving the needs of the customers and how great of a commerce experience it is creating for African shoppers. I do not have the answers to the affirmative action questions on funding but I feel Jumia has done a great job of opening up retail, which to a large degree is still offline. I think we can sit and complain about how African a company solving a complex problem on the continent is, or we can get in on the action by calling your broker and asking if they can help you get in early.
Then again, I am a small scale farmer. What do I know?