Jumia, Africa’s leading e-commerce platform, has announced plans to shut down operations in South Africa and Tunisia by the end of this year, marking a strategic shift to focus on higher-growth markets with stronger potential for profitability.
This decision comes as part of Jumia’s broader effort to cut costs and improve its financial standing, which has remained elusive despite its leading position in the African e-commerce space. The departure from these markets, will allow Jumia to focus resources in its most promising markets that have a stronger growth potential.
For the year ended December 31, 2023, and the six months ended June 30, 2024, South Africa and Tunisia combined accounted for only 3.5% and 2.7% of total orders, and 4.5% and 3.0% of GMV, respectively. The strategic decision to close operations in these markets is expected to improve overall operational efficiency across Jumia’s business.
“After a thorough analysis, we decided to close down our operations in South Africa and Tunisia. Both businesses account for a negligible portion of our overall operations,” said Jumia CEO Francis Dufay in a recent statement.
Dufay added, “Competitive and macroeconomic conditions in both markets have limited each country’s growth potential, and their contribution to our overall business has not aligned with expectations. These decisions are never easy, and we are extremely grateful to the team members in both countries who worked tirelessly to serve our customers.”
Since he took over as CEO, Dufay has been pursuing a cost-cutting strategy, part of which led to the cutting of about 900 jobs in February 2023, 20% of its general workforce. The company also shut down Jumia Foods across several African countries, including Nigeria, Kenya, Morocco, Ivory Coast, Tunisia, Uganda, and Algeria by the end of December 2023.
Despite Jumia Food contributing 11% to Jumia’s overall gross merchandise value, it consistently operated at a loss in the North, East, and West African countries where it operates. Dufay’s focuse on reducing Jumia’s operating losses and setting the company on a clear path to profitability, have continued to yield positive returns, after the company in July this year, saw its market cap surpass $1.33 billion.
The surge in market rally marked a notable shift in fortunes for the company, which has experienced a rollercoaster ride as a publicly traded company since its debut on the New York Stock Exchange in April 2019.
The recent exit from South Africa comes shortly after the country’s largest online retail group, Takealot, announced the sale of its fashion business Superbalist in response to intensifying competition from Chinese fast-fashion e-commerce platforms Shin and Temu. The closures are expected to result in the loss of around 110 jobs, though some employees may be relocated to other parts of Jumia’s operations.
While the closures are significant, Jumia’s broader challenges have been driven by currency depreciation in key markets like Nigeria and Egypt. Despite a rise in order volumes, the company reported a drop in total order value to $170 million in Q2 2024.
As Jumia gears up for its upcoming earnings report, the company aims to restore investor confidence through improved financial performance and a potential rebound in its stock price. To bolster its growth strategy, Jumia recently raised nearly $100 million through secondary share sales and expanded its supplier base and logistics network. Remaining markets, including Egypt, Kenya, Morocco, and Nigeria, are expected to help the company recover lost volumes from South Africa and Tunisia.
