As it sojourns to IPO in NYSE, Jumia has picked $56 million from Mastercard Europe. It needs any boost it can get as it goes public for good. The business of ecommerce in Africa is a long-run game. All the investors must play that game.
Jumia, which will trade as “JMIA” on the NYSE, has also received a cash injection ahead of its public offering: in a private stock sale, the company has confirmed a $56 million private placement from Mastercard Europe. It means Mastercard will be buying shares at whatever price investors agree ahead of the float and gives Jumia a confidence boost ahead of an uncertain listing for a young company which positions itself both as an “emerging growth company” and a “foreign private issues” as defined under US securities regulations.
As with most companies ahead of a prospective listing, Jumia’s S1 filing covered several risk factors for investors to consider while it talked up its ambitions in Africa’s e-commerce space, including touting its four million active customers across 14 African countries. But as Quartz Africa noted, the risk factors offer just a hint of how costly it is to crack e-commerce across Africa. As of the end of last year, Jumia had accumulated losses of nearly $1 billion and had negative operating cash flows of $159.2 million, for the 12 months to Dec 31, 2018. Its annual losses have also grown annually widening to $195.2 million on revenue of just $149.6 million last year.
Yes, a game that requires looking at years and not months.
In this videocast, I discuss the future of e-commerce in Africa and why the sector is still anyone’s game to win despite the presence of key competitors. The loss-making sector demands someone with capital to boost logistics and accelerate scale to make money. Today’s leaders are not doing that yet, and can be easily disrupted and displaced. But there are challenges in competing in this sector because the environment and the fundamentals are toxic with largely no infrastructure to key in. The business competitive factor is not the internet or website but logistics. Winning this sector to become a category-king will be settled by a company that can invest, at scale, in logistics to serve more cities and countries.