Jumia, the first African start-up listed on the New York Stock Exchange, has experienced a steep decline following its IPO a year ago. The company has shut down operations in three African nations, continued to report significant losses, and faces scrutiny over its business model. Despite a temporary spike in online engagement due to the pandemic, Jumia is still struggling to establish profitability, leading to substantial changes in leadership and operational strategy. The situation raises concerns about the sustainability of Jumia’s operations and the viability of its identity as an African tech firm, considering its corporate structure and global practices.
A year following its much-anticipated initial public offering (IPO) on the New York Stock Exchange, Jumia, an e-commerce start-up, has begun to experience substantial decline, shutting down operations in three African countries while struggling to achieve profitability. This troubling trajectory has been underscored by the resignation of its original owners and the significant losses reported by the company. Recently, Jumia’s co-CEOs, Jeremy Hodara and Sacha Poignonnec, announced they would be accepting a 25% reduction in their salaries in a bid to help the online retailer manage costs in light of the coronavirus pandemic. According to reports, Jumia’s losses surged by 34%, totaling approximately $246 million, marking its eighth consecutive year without a profit. While the pandemic triggered an increase in online shopping due to widespread lockdowns, leading to the company boasting 6.1 million active consumers—a notable increase from four million in 2019—this uptick has not sufficed to reverse its financial strife. In response to the evolving marketplace during the pandemic, Jumia expanded its product offerings to include groceries and health-related items, instituted contactless delivery systems, and encouraged cashless transactions. Yet, these efforts did not prevent the company from exiting three markets—Rwanda, Tanzania, and Cameroon— in a desperate attempt to attain profitability. Jumia’s IPO in April 2019 had been heralded as a significant milestone for African technology startups, with the company valued at $1.1 billion. Despite an initial surge in stock price, reaching a peak of $49.77 shortly after going public, its value has since plummeted due to various allegations of fraud and hidden losses, coupled with a critical short-seller report. The stock price has settled at an all-time low of $2.15, leading evidence of a grim outlook for the company’s future. Further exacerbating its troubles, its founding investor, Rocket Internet, divested its entire 11% stake just a week before the company’s first anniversary as a publicly traded entity. Analysts, including Rebecca Enonchong, assert that Jumia’s business model is failing and that the stock price reflects the company’s dismal performance.
Jumia was established to serve the burgeoning e-commerce market in Africa, reflecting the continent’s growth potential in the digital landscape. The company operates as a multifaceted online marketplace, incorporating logistics and payment services, which positions it similarly to global giant Amazon. Jumia’s journey took a significant turn with its IPO in April 2019, presenting itself as the first African start-up to be listed on the NYSE. As a symbol of hope for African technology companies, Jumia’s trajectory demonstrated both the aspirations and the challenges inherent in scaling operations in a rapidly developing market. The pandemic-induced surge in online shopping raised expectations of recovery, yet financial realities have continued to unfold contrary to optimism.
In summary, Jumia’s journey from a promising e-commerce start-up to a company grappling with severe challenges serves as a cautionary tale within the broader narrative of African technology enterprises. Despite early enthusiasm following its IPO, Jumia’s substantial financial losses and market exits illustrate the complexities associated with achieving sustainable profitability. The company’s leadership changes and shift to cut costs in response to the ongoing crisis underscore the pressures it faces in a competitive and evolving digital marketplace. The critique expressed by various stakeholders further emphasizes the need for a reevaluation of Jumia’s business model and identity within the African context.
Original Source: www.bbc.com
