Africa’s Amazon needs to overcome many problems

No fear, no thrill. Adrenalin junkies had a lot to enjoy in Jumia’s initial public offering in April. The Nigeria-based ecommerce company was dubbed Africa’s Amazon, thanks to its scale and ambition. But its prospectus also listed a litany of risks that took nearly 50 pages to describe. The shares tripled in value in the first few weeks of trading, only to fall nearly 90 per cent in the months that followed. Now, in a further sign of waning excitement, the company is being forced to retrench. Jumia is suspending its business in Rwanda, just weeks after it exited Cameroon and Tanzania… Though Jumia can tap into a potentially huge market it needs to overcome problems that are acute in parts of Africa… The fear is that Jumia, which has under €300 million of cash, will run out of money before being able to fulfil its potential. Given its market value is just $438 million, a cash call would heavily dilute existing shareholders. Selling a stake in its payment platform Jumia Pay might raise funds. A deep-pocketed investor might consider a buyout. Acquiring Jumia would be cheaper than building a pan-African business from scratch. Any potential acquirers, if they exist, might prefer to bide their time. The shares are cheap. They are likely to get cheaper still. 

Lex.

Food4Brains

SUBSCRIBE and RECEIVE your DAILY BRAIN FOOD!