"The Amazon of Africa": Jumia CEO Explains the eCommerce Opportunity Ahead

Credit: The Street
Published on April 12, 2019 - Duration: 03:51s

"The Amazon of Africa": Jumia CEO Explains the eCommerce Opportunity Ahead

Jumia Technologies , the first African tech unicorn to list on the NYSE, is drawing some lofty comparisons on its first day of trading.

Shares of the Nigeria-based eCommerce company rocketed more than 50% shortly after listing on the NYSE, leading to a valuation just short of $2 billion at day's highs.

The excitement over the listing comes as the is drawing comparisons to international eCommerce kings Amazon , Walmart's Flipkart, and Alibaba .

In terms of the unaddressed market opportunity the eCommerce company is aimed at, the comparisons might not be completely unfair.

Jumia currently courts four million active consumers across 14 African nations in six separate regions across the continent, without any comparable peer.

The macro factors ahead in each of the regions it dominates are overwhelmingly encouraging.

According to the UN, more than half of global population growth between now and 2050 is expected to occur in Africa, with the organization noting that even uncertainty surrounding future fertility rates are unable to temper growth rates.

"The large number of young people currently on the continent, who will reach adulthood in the coming years and have children of their own, ensures that the region will play a central role in shaping the size and distribution of the world's population over the coming decades," a UN report reads.

However, pure population growth is not enough to guarantee success, as Africa has experienced rapid population growth for decades already.

The emergence of a consumer class is the key.

Stats from the McKinsey Global Institute indicate that consumer spend on the continent is set to accelerate from $860 billion in 2008 to $1.4 trillion in 2020 and grow from there.

Additionally, 36% of the continent's population is now using the internet regularly, a growth of 10,402% since the dot com bubble in the U.S. Still, there are some issues confronting the company, namely an as of yet unprofitable business model.

"Since we were founded in 2012, we have not been profitable on a consolidated basis," the company sated in an F-1 filing.

"There is no guarantee that we will generate sufficient revenue in the future to offset the cost of maintaining our platform and maintaining and growing our business." As of December 31, 2018, the company had accumulated losses of €862.0 million since inception.

Also, a confluence of geopolitical risks could make many investors cautious about adding a position in an African company, even if they believe Jumia can find a path to profitability as Amazon did years ago.

To hear CEO Sacha Poignonnec explain why the opportunity ahead supersedes the risks at present, check out our interview with him amid the IPO excitement above.

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