Jumia is shutting most of its operations across Africa. From Cameroon to Tanzania, the next on the line is Jumia Foods Rwanda. According to Jumia Technologies the suspension of its food and drinks delivery service Jumia Foods Rwanda takes effect from December 9, 2019. The suspension comes after Jumia said it had shut its e-commerce business in Tanzania in late November, and in Cameroon in the middle of the same month.
“We have made the difficult decision to suspend our on-demand services in Rwanda effective on … December 9th, 2019,” the company said in a statement.
“While decisions like these are always difficult, it is more important now than ever to put our focus and resources where they can bring the best value and help us thrive.”
Here Is All You Need To Know
With an e-commerce business similar to Amazon’s and a classified portal like Alibaba’s, Jumia sells its own stock and takes a cut of third-party transactions on its website.
But that business model has yet to pay off. Jumia missed revenue estimates for the second time in three quarters, according to results announced in November.
The closure however, did not start today; it began in 2014 amid allegations of fraud which cost the business up to $1 billion. The closure of Jumia Food Rwanda operations is the fourth in a row after the online retailer first closed its entire Rwandan e-commerce business in 2017 over quality issues, focusing on its food delivery services in the country.
The closures bring Jumia’s footprint in Africa to 11 countries and point to the difficulty of running an ecommerce business across a continent with weak infrastructure, under-developed logistics and a general lack of trust in online shopping.
It also puts a dent in what the Rocket Internet-backed company has long touted as one of its key advantages: scale.
Sacha Poignonnec, co-chief executive, said the exits were routine, as the company reassesses its markets, products and services. He noted that in the past, it had left countries such as Mozambique and closed its ride-hailing business. On Tuesday, Jumia also said it is in effect shutting its travel website.
“It’s a continuity of recent changes and the strategy is very much for us, it’s very simple, we are engaged in taking Jumia to profitability and drive penetration of JumiaPay,” he said, referring to the company’s payments platform. “Sometimes we make decisions to change the scope of countries or categories . . . but it is in the normal life of a company to adjust the focus, but the strategy remains very much the same.”
Mr Poignonnec emphasised the need to control costs. Losses grew to €54.6m in the third quarter from €40.6m a year earlier, while revenues missed analyst estimates for the second time in three quarters. Jumia has run up more than $1bn in losses since launching in 2012 in Nigeria.
But Mr Poignonnec cited the success of Amazon, China’s Alibaba and Latin America’s Mercado Libre as proof that the model Jumia is pursuing can work. He pointed to Jumia’s rising customer and seller numbers as positive signs.
Fintech, the New Profitable Model?
Jumia ’s closure in Cameroon, Tanzania and its gradual winding down in Rwanda cannot just be disregarded. The New York-listed company has made it clear in recent times that it is shifting more of its focus on its payment platform, Jumia pay while cutting back on the e-commerce business. Indeed, unconfirmed sources say Jumia is contemplating pulling out of its Congo and Gabon operations too. Consequently, the company now maintains presence in 13 African countries including Kenya, Ghana, Senegal, Nigeria, South Africa, Egypt, Morocco, Uganda, Tanzania, Rwanda, Ivory Coast, Tunisia, and Algeria.
Could the new focus on fintech be a major indictment on eCommerce in Africa?
Recall that Konga, a similar eCommerce company, recently gave up the ghost earlier than expected and got swallowed up by Zinox Group, a deal that was quoted in some quarters to be worth $32.4 million, which was grossly a sad event for an e-commerce company that was once valued at $383 million by Naspers.
From disclosures made in the Prospectus to the Initial Public Offering, it does not also appear that Nigeria, Jumia’s primary market, is seriously considering investing significantly in the eCommerce business. As a matter of fact, about 60.5% of Jumia’s shareholding before going on its first public offering consisted of European nationalities, while South Africa takes a staggering 29.7% of the shareholding at the said time. Even before Konga was acquired by Zinox Group, Kinnevik (Swedish) and Naspers (South African owner of Multi-Choice, M-Net, OLX) had a combined shareholding of 89.4%. Perhaps the fear would lie in the humongous losses sustained by these companies.
Jumia’s losses increased by 60% from €41.9 million (KSh4.8 billion) in first half of 2018 to € 66.7 million (KSh7.6 billion) in the first half of 2019. The Berlin-based company also recorded a loss of KSh 6.2 billion in Q2 of 2019, a 60% increase from 2019 Q1 losses.
Citron Research (the American research firm that publishes reports on firms that Citron Research founder, Andrew Edward Left thinks are overvalued or are engaged in fraud) had earlier in 2019, in the aftermath of Jumia’s IPO, said, in a twelve-page document, that it had never seen such an obvious fraud as Jumia’s first Initial Public Offering, held from the 11th of April, 2019, in its 18 years of publishing.
Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organizations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution, and data analytics both in Nigeria and across the world
Africa’s first unicorn, Jumia has completed the closure of its Cameroonian operations. The process was declared complete when the ecommerce company fired all of its staff and closed down its entire operations in Cameroon, amid mounting losses. The closure however, did not start today; it began in 2014 amid allegations of fraud which cost the business up to $1 billion. The closure of Jumia ‘s Cameroon operations is the second in a row after the online retailer closed its entire Rwandan e-commerce business in 2017 over quality issues, focusing on its food delivery services in the country.
Fintech, the New Profitable Model?
Jumia ’s closure in Cameroon cannot just be disregarded. The New York-listed company has made it clear in recent times that it is shifting more of its focus on its payment platform, Jumia pay while cutting back on the e-commerce business. Indeed, unconfirmed sources say Jumia is contemplating pulling out of its Congo and Gabon operations too. Consequently, the company now maintains presence in 13 African countries including Kenya, Ghana, Senegal, Nigeria, South Africa, Egypt, Morocco, Uganda, Tanzania, Rwanda, Ivory Coast, Tunisia, and Algeria.
Could the new focus on fintech be a major indictment on eCommerce in Africa?
Recall that Konga, a similar eCommerce company, recently gave up the ghost earlier than expected and got swallowed up by Zinox Group, a deal that was quoted in some quarters to be worth $32.4 million, which was grossly a sad event for an e-commerce company that was once valued at $383 million by Naspers.
From disclosures made in the Prospectus to the Initial Public Offering, it does not also appear that Nigeria, Jumia’s primary market, is seriously considering investing significantly in the eCommerce business. As a matter of fact, about 60.5% of Jumia’s shareholding before going on its first public offering consisted of European nationalities, while South Africa takes a staggering 29.7% of the shareholding at the said time. Even before Konga was acquired by Zinox Group, Kinnevik (Swedish) and Naspers (South African owner of Multi-Choice, M-Net, OLX) had a combined shareholding of 89.4%. Perhaps the fear would lie in the humongous losses sustained by these companies.
Jumia’s losses increased by 60% from €41.9 million (KSh4.8 billion) in first half of 2018 to € 66.7 million (KSh7.6 billion) in the first half of 2019. The Berlin-based company also recorded a loss of KSh 6.2 billion in Q2 of 2019, a 60% increase from 2019 Q1 losses.
Citron Research (the American research firm that publishes reports on firms that Citron Research founder, Andrew Edward Left thinks are overvalued or are engaged in fraud) had earlier in 2019, in the aftermath of Jumia’s IPO, said, in a twelve-page document, that it had never seen such an obvious fraud as Jumia’s first Initial Public Offering, held from the 11th of April, 2019, in its 18 years of publishing.
Late August, 2019 Jumia fired some of its employees in Nigeria and suspended a number with regards to improper sales practices. Jumia Technologies AG said it identified dubious transactions that accounted for approximately 4 per cent of its sales in the first quarter of 2019.
The Berlin Based company revealed that independent sales agents under its “J-Force” sales platform worked with employees and sellers to make undeserved gains from commissions and seller fees.
So Jumia ‘s closing of its Cameroon ‘s operations could be part of a long term strategy of migrating over to fintech.
Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organizations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution, and data analytics both in Nigeria and across the world
Nothing lasts forever, goes the saying. For the Baby Boomers and Generation X who existed without the internet, it was a shock that the traditional, physical retail business model could fade away, to be replaced by the business at the click of a button.
Today, Amazon Effect means that traditional, physical retail shops continue to wind down and call it a quit, giving in to the stiff competition from Amazon, eBay, Alibaba, Jumia and online shops. For emerging markets and developing countries, what remains for these physical shops to be completely rendered to ruins is trust.
Chinese billionaire, Jack Ma, understood this early enough. In 2016, Jack Ma started a revolution he called the ‘New Retail’ that would itself redefine what commerce really means for all of us. Jack Ma is the 21st richest man in the world and the number one richest man in the most populous nation on Earth— China.
He is piercing the heart of commerce and extracting what has fueled commerce over the course of thousands of years ago — human beings. Through new retail trade, he is relaunching the whole idea of technology in commerce and trade itself to the people that originally own them — human beings, consumers.
“Commerce as we know it is changing in front of our eyes. E-commerce” is rapidly evolving into “New Retail.” ,” Ma wrote to Alibaba shareholders in a letter sent ahead of the New York-listed company’s annual shareholders in 2016. ”The boundary between offline and online commerce disappears as we focus on fulfilling the personalized needs of each customer. We anticipate the birth of a re-imagined retail industry driven by the integration of online, offline, logistics and data across a single value chain. This is why we are adapting, and it’s why we strive to play a major role in the advancement of this new economic environment.”
This may sound more Utopian than realistic, but in China where the concept was formed, Hema Supermarket, an arm of Alibaba that specializes in new retail, has opened 64 Hema stores in 14 cities, with over 10 million customers shopping at these supermarkets since the beginning of 2016.
On average, for a Hema Supermarket that has been open for at least 1.5 years, daily average sales are upwards of 800,000 yuan (US$116,500) — about 60 percent of which comes from online orders. Based on Alibaba’s data, offering a combination of online and offline shopping options results in an increase in average monthly spending by customers. Consumers who shopped both online and offline at Hema spent an average of 575 yuan monthly, compared to under 300 yuan for purely online, or purely offline shoppers.
Pinduoduo, the $1.5B Chinese startup is also another Chinese e-commerce company, engaged in new retail. The startup is challenging the giant Alibaba in China’s towns and villages. In January, Pinduoduo had 114 million active users, surpassing that of New York-listed Chinese discount retailer Vipshop. Currently, the startup has captured a projected 7.0% of all retail e-commerce sales in China this year, not a bad showing for a firm that launched in 2015. In three short years, Pinduoduo has emerged as one of China’s fastest growing shopping startups, with as many as 55 million users accessing the site per day.
Pinduoduo’s idea of new retail comes by way of offering group discounts.
Here Is How The Idea of New Retail Works
The idea of new retail lies in thinking beyond the boundaries of the two-party system of retail operations, that is, e-commerce and legacy brick-and-mortar retailing. New retail, instead, focuses on employing an entirely new operating system for reaching and inspiring consumers to shop.
‘‘New Retail trade is trying to solve two particular core challenges in the industry,’’ Emmanuel Elem, an advocate of Sairui, Africa’s new retail startup said. ‘‘The first challenge is the challenge of cold war between offline and online malls. Shoprite is an offline multi-billion dollar shopping mall, for example. On the other hand, Jumia is an online mall. These two different malls are doing things differently and the truth is that they are struggling for the same customers.’’
Now, there are people who have sworn [or who are so internet phobic] that they cannot buy or make payment on the internet because they cannot see the person they are buying from. There are also people that say they don’t have the time to go to Shoprite and begin to buy things [be in the queue and waste their time?] when they have Jumia that can get them what they want in their houses while they wait patiently for delivery to be made. So what new retail is trying to do is to bring a marriage between online malls and offline malls.
By new retail, it will no longer be about online shopping malls. They will also have offline shopping malls or offline distribution centers where people can go, select what they want, pay online and if they don’t want to pay online, they can go to the mall offline and make payment and collect the goods, with the coupon they present to the owner of the shop.’’
He says new retail trade represents a system that blends the best of what both offline and online worlds have to offer. Apart from that, it also offers the best of an entirely new mix of human, digital and physical experience design, giving consumers a new means of inspiration, selection, immediate gratification, physical sensation and convenience, and that ultimately renders the distinction of digital vs. physical irrelevant.
Sairui, The First African New Retail Option Is Gaining Momentum
Although launched this year, March, Sairui is on course to change the idea of internet retail trade. Modeled after Chinese Pindoudou, the startup, which has its Africa headquarters in Accra, Ghana sells everything from clothing to hardware and other commodities and offers large discounts to purchasers. The startup has a strong presence in Nigeria and is also extending to other Africa countries like Cameroon, Uganda, Zambia, Tanzania, and other places.
‘‘We are doing this simultaneously,’’ said Elem. ‘‘Sairui is all about supporting grassroots entrepreneurship. Sairui shows people the possibility of starting to build a business no matter how small they have because with as small as less than 10,000 naira, they can become a business build through Sairui. This is exactly what it’s called pure grassroots entrepreneurship. Sairui also has bigger packages for those that don’t want to start with such small amounts of money.’’
The startup says it has multiple certified safeguard mechanisms, genuine licensed goods at lower prices and more reliable quality.
The Major Changes The Startup Is Bringing To The Table Are In The Logistics And The Customer Experience Areas
The startup offers large discounts to its online shoppers, bringing on-board an entirely new way of buying and selling.
‘‘What Sairui has brought in is the possibility of online and offline shoppers becoming business owners while also shopping. This has nothing to do with network marketing,’’ Elem said. ‘‘Network marketing is a different ball game altogether. Sairui has variety of products.’’
Elem said to handle logistics, the startup has physical shops where the online shoppers can go, present their coupons and redeem their goods or simply make new purchases.
‘‘Sairui is not opening up physical shops on its own. Sairui is opening up these physical shop through partnership or mini-franchising. These shops are called service centers. The centers are there to service our customers who can come and pick up these products. It is either you pay the company online or through these service centers. You can select your products online or you go to the service centers, give them your cash and carry your products. But the simple truth is that the products are going to be very affordable.Right now, we have about three physical malls in Nigeria through what we call Service centers. We service our customers through our customers centers there. We have centers in Cameroun. We have in South Africa. Right now, we have in about seven African countries.’’
For a startup that is just three months old, this appears a great streak of success, but the startup believes its incorporation of Jack Ma’s concept of new retail trade into its business strategy doesn’t just stop at setting up physical locations to enhance internet commerce experience but also that the strategy means consumers on the platform would get a chance to develop business interests from their purchasing or consumption needs.
‘‘Sairui is not a B2B company. Sairui deals directly with end users. We are dealing directly with the end users; people that are consuming these products. We are not dealing with business owners . We are making the end users business owners and also consumers linking them up directly with the manufacturers of these products, removing the middle person involved,’’ Mr. Elem said.
But it does appear that even the B2B middlemen would still have a say after all since the aim is to turn your consumption cost into instant profitability.
‘‘If you do some shopping on a $100 product on Sairui, for instance, we are giving you a discount of 60% on each product, meaning you’re getting a chance to buy two more products. Now, Sairui will help you sell those two discounted products you bought through its wholesale store,online or offline, free of charge. Sairui will sell each of them on your behalf at $100 each, the initial retail price at which you bought them.’’
The startup boasts it would sell off the products on behalf of its customers within a 7 to 10 days period, leaving customers with some unexpected side profit, long hours after they have made their first purchases.
‘‘We are the pioneer of this kind of system,” Elem said. ‘‘It may be strange to African markets, but the simple truth is that over 20,000 e-commerce companies are already using new retail to run their businesses in China. You can trade as many times as you want with one-time principal.’’
Elem said offering discount does not represent any loss for the startup because of a direct partnership with manufacturers of the goods sold by the startup. He said Sairui mall is an open market place just like Amazon, and as such, anything is bound to happen.
‘‘It is just like asking people why they drink water from a clean cup,’’ he said. ‘‘Nobody would see what is good and wouldn’t want to go for it. The general ideology of new retail is encouraging grassroots entrepreneurship. Sairui is a unique opportunity that anyone shouldn’t miss, even though not for the sake of profit, but for the sake of buying things affordable prices and getting free products from its online or offline shops.’’
Getting Started With Sairuimall Africa
To learn more about how to be part of the Sairui value chain, contact the startup’s country director on +2348039421770
Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organizations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution, and data analytics both in Nigeria and across the world.
Despite listing on the New Stock Exchangeand getting called a fraud by Citron Research and begging to be given one more chance to prove its mettle, Jumia is giving reasons why it listed on the New York Stock Exchange instead of the Nigerian or the more developed Johannesburg Stock Exchange. Here are some of the reasons given by Jumia for this.
Jumia CEO, Juliet Anammah
Despite listing on the New Stock Exchangeand getting called a fraud by Citron Research and begging to be given one more chance to prove its mettle, Jumia is giving reasons why it listed on the New York Stock Exchange instead of the Nigerian or the more developed Johannesburg Stock Exchange. Here are some of the reasons given by Jumia for this.
E-commerce Business in Nigeria and Africa Has No Long-term Investors
Jumia said the first reason why the e-commerce giant had to bypass the Nigerian and other African Stock Exchanges is because e-commerce in Africa has no long term investors. This is why, according to it, it had to explore the American market, where there is deeper understanding of how the market works. In fact, for Jumia Nigeria’s Chief Executive Officer (CEO), Juliet Anammah, Nigerian investors are impatient and can’t wait for long-term returns on their investment. American investors, on the other hand, are prepared to invest and wait for long term returns on investment (RoI).
Konga As A Case Study
Even Citron Research, which cited Jumia for fraud wrote this about Konga, Nigeria’s second leading ecommerce company which has been acquired by Zinox Group.
The divestment of Naspers(a South African company), ‘‘the smartest and largest tech investor in Africa’’ from Konga, another online eCommerce company in Nigeria was not due to a lack of funds or a short-term investment horizon,[after all,] Naspers has $12 billion of cash on the balance sheet and its original investment in Tencent ([in which it] still owns >30%) dates back to 2001… Rather, this decision was a reflection of Naspers’ bearish view on the Nigerian eCommerce market vs. a bullish view on South African eCommerce. Since its Konga exit, Naspers announced plans to invest over $300 million in South African tech businesses,’’ Citron noted.
Of all arguments, the least would be that Naspers divested from Konga not because of a short-term focus. Tencent, which Citron cited, is not notorious for ecommerce business, like Alibaba or Amazon. In fact, Konga was founded in 2012. Naspers acquired 50% equities in Konga in 2013, a year after Konga was formed, and finally divested in 2018, a space of five years. This does not disclose a longer term investment of say, 10 years.
E-commerce Platforms Are Not Reputed To Make Profit In The Short Term
Another reason given why e-commerce business have issues with investors is that it hardly makes profit in the short-term.
Anammah said e-commerce platforms are not reputed to make profit in the short term, stressing that investors in Alibaba had to wait for long term Return on Investment.
It took Amazon, the global leading online retailer as a public company to make profit. The company first reported a quarterly profit in the fourth quarter of 2001 and at $5 million, which may not be too attractive for investors. It did not come as a surprise that towards the end of 2017, Amazon reported a whopping $1.86 billion in net income. This does not seem to bother Amazon CEO Jeff Bezos whose cardinal business objective was to sustain more investment for the future growth of the company.
Much of Amazon’s profit was bolstered by the US tax cut, which added about $790 million to its profit in accounting terms. Take that away, it would have taken Amazon a longer time to make profit.
So When Will African E-commerce Companies Consider Listing In Their Countries?
Jumia Nigeria’s CEO Anamma said listing on the African Stock Exchange would take would not take a much longer time than expected. Jumia said this may happen soon, by 2022 when investors must have understood the dynamics of the industry.
Jumia Finally Comes Hard On Citron
Anammah said Jumia is seriously considering launching a legal battle against Citron Research which released a controversial report recently.
“We are looking at it (taking legal action). The board is looking at it. Some recent allegations were made about Jumia on the basis of selected, biased or unverified facts with what appears to be a clear objective of damaging Jumia. We held our earnings call on Monday May 13th and we published our first quarter results, which we are very pleased with, and provided information to demonstrate those recent allegations are wrong, ’’ Juliet Anammah said.
Jumia, on April 12 2019, became the first African tech stock to list on Wall Street and its shares soared as analysts branded it the ‘Amazon or Alibaba of Africa’. But the shares fell sharply after Citron Research’s publication which questioned some of Jumia’s sales figures and accused the firm of fraud. The shares have since rebounded.
Charles Rapulu Udoh
Charles Rapulu Udoh, a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organisations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution and data analytics both in Nigeria and across the world.
From being the first successful African startup to list on the New York Stock Exchange, now to the first fraud to ever make its way to the floor of the American Stock Exchange from Africa.
It appears Jumia is in for a big trouble. Citron Research, the American research firm that publishes reports on firms that Citron Research founder, Andrew Edward Left thinks are overvalued or are engaged in fraud is saying, in a twelve-page document, that it has never seen such an obvious fraud as Jumia’s first Initial Public Offering, held from the 11th of April, 2019, in its 18 years of publishing.
‘‘ Jumia is the worst abuse of the IPO system since the Chinese RTO fraud boom almost a decade ago. Worse than being “the most expensive” US listed eCommerce company, Jumia reported financials show us a stagnant business that has burned through $1 billion and has moved the suckers game to the US Markets,’’ the report stated.
As the media in the US is naively anointing Jumia the “Amazon of Africa”, the media in its home country of Nigeria has a plethora of articles discussing the widespread fraud in this Nigerian company. Not even that elusive Nigerian prince can cover this one up.
What Went Wrong?
The deal is that Jumia lied. Not one. But so many times, said Citron. The research firm claimed it has finally laid its hands on Jumia’s most confidential documents before the IPO, and from all indications, Jumia’s equities seem to be the most worthless ever to be sold on the New York Stock Exchange.
‘‘When a company markets to investors ahead of its IPO and then a few months later omits material facts and makes material changes to its key financial metrics to make the business seem viable, this is SECURITIES FRAUD,’’ the report read.
Now These Are What The Firm Claimed To Have Found:
1. ‘‘In order to raise more money from investors, Jumia inflated its active consumers and active merchants figures’’
The inflation came by way of 20–30% increase in the number of Jumia’s active consumers and active merchants, Citron noted.
”The most disturbing disclosure that Jumia removed from its F-1 filing was that 41% of orders were returned, not delivered, or cancelled. This was previously disclosed in the Company’s October 2018 confidential investor presentation. This number is so alarming that it screams fraudulent activities,” the report noted.
”Instead, Jumia disclosed that “orders accounting for 14.4% of our Gross Merchandise Volume were either failed deliveries or returned by our consumers” in 2018. Assuming 41% of orders were returned, not delivered, or cancelled in 2018, this implies that almost 30% of orders were cancelled in 2018. Since Jumia primarily sells consumer electronics, which should not have this high of a cancellation rate, it wreaks of fraud.”
2. ‘‘Just before IPO, a Jumia MD was questioned by Nigerian Police over Allegations of Fraudulent Diversion of Funds’’
It doesn’t look like Citron is out for a joke. The firm claimed Jumia’s fraud starts from the top to the bottom.Jumia Co-CEO, Jeremy Hodara, the firm claimed, has engaged in extremely questionable related party transactions that the SEC should immediately question. It went on to provide a sequence to these questionable transactions.
In February 2016, four of Jumia’s subsidiaries were sold to Jumia’s CEO, Hodara for 1 euro each.
Despite only generating revenue of 238 thousand euro and net losses of over 3 million euro in 2017, Jumia reacquired these businesses in 2018 from Hodara for an undisclosed price.
During the same year, Jumia acquired Jumia Facilities, a payroll and support services operation based in Dubai, from Hodara for an undisclosed price.
”…many top directors of Jumia were engaging in serious acts of fraud including diverting money that was supposed to be used for projects into their own bank accounts and using director owned private companies to accept Jumia orders while receiving advance payments but never fulfilling the orders. In some cases, these fraudsters were relatives of senior management and “the directors would sweep the case under the carpet in order to avoid public scrutiny”.
Jumia’s Stocks Came Tumbling Down On The New York Stock Exchange
Now, it appears Citron Research now has laughed the last and the best laugh. Jumia’s investors are pulling out!
Jumia’s share price has dived sharply since Citron’s report.
In the seven hours of trading on Thursday, Jumia’s shares lost 18% of its value.
The Bottom Line
From all indications, it appeared Citron Research was out to disparage one country — Nigeria — and possibly block further companies there from getting approval to list on the New York Stock Exchange in the future. The firm even went as far as mentioning that Jumia learned the hard way that Nigeria, Jumia’s largest and most important market, is not an easy place to do eCommerce for plenty of reasons including logistics, poverty, and a culture of corruption. It went ahead to cite the recent divestment of Naspers(a South African company), which it described as ‘‘the smartest and largest tech investor in Africa’’ from Konga, another online eCommerce company in Nigeria.
‘‘This was not due to a lack of funds or a short-term investment horizon,[after all,] Naspers has $12 billion of cash on the balance sheet and its original investment in Tencent ([in which it] still owns >30%) dates back to 2001… Rather, this decision was a reflection of Naspers’ bearish view on the Nigerian eCommerce market vs. a bullish view on South African eCommerce. Since its Konga exit, Naspers announced plans to invest over $300 million in South African tech businesses,’’ Citron noted.
No matter how you see it, the report appeared to have gone after Nigeria rather than focus more intensely on Jumia. After all, although Nigeria is Jumia’s biggest market, its S1 filing (which Citron claims to have studied) indicates that Jumia Group is not a Nigerian company as it is led by French founders, incorporated in Germany and headquartered in Dubai.
Citron Research is sending a message to American and international investors that Jumia is not only a fraudulent company which ‘‘not even that elusive Nigerian prince’’ can deny, but also that they are throwing their money into the wrong country where it is ‘‘not easy…to do eCommerce…because of …a culture of corruption.’’ (NB: ‘Nigerian Prince’ is a reference to the notorious Nigerian internet fraudsters, popularly known as Yahoo! boys)
Whether Jumia comes out of this unscathed, only time would tell.
Charles Rapulu Udoh
Charles Rapulu Udoh, a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organisations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution and data analytics both in Nigeria and across the world.
