The internet has been ablaze with news of a landmark moment in African tech as e-commerce company Jumia raised $196 million from an initial public offering (IPO) on the New York Stock Exchange (NYSE).
Jumia, which has operations in 14 African markets and more than 4 million customers, saw its stock go on sale valued at $14.50 per share. Then stock leaped 75 percent to $25.46 as investors valued the company at more than $1.9 billion.
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It was the first time an African unicorn — a tech company valued at more than $1 billion — successfully listed on an international exchange. Jumia has MTN as its biggest shareholder and also recently secured backing from Mastercard and Pernod Ricard.
Many took to social media to herald a new dawn for the African tech space, among them Andela vice president of global operations Seni Sulyman. “One of the positive outcomes of their IPO is that many Africans might just now dare to build companies that one day list on global stock exchanges. That can’t be such a bad outcome,” he said.
Others disagreed. The issue is just how African is this “African IPO” ? And the answer is, not very.
Jumia is a European-headquartered company with European founders and was originally funded by a European company. Based in Berlin, founded by French entrepreneurs Sacha Poignonnec and Jeremy Hodara, and financed in its early days by Rocket Internet, Jumia is, at its core, non-African. Even its technology center is in Porto, Portugal, with African offices merely hosting local staff.
Jumia’s SEC filing said it was “active”, not domiciled, in six African countries. There are lots of companies active in Africa that aren’t African. Google just launched an artificial intelligence lab in Ghana, yet it is clearly a U.S. company. Coca Cola has been busy on the continent for years. Neither claim to be African businesses. Yet Jumia builds a narrative around that.
This has been the source of much discussion on Twitter, with various African tech luminaries taking the chance to argue the irrelevance of the IPO to the African tech space. Key among them was Jason Njkoku, CEO of Nigerian video on demand startup iROKO, who tweeted: “Jumia IPO is great for Rocket Internet. For the founders of Nigeria tech it means nothing.”
It is hard to disagree.
All the talk around how African Jumia is or is not may be missing the point, however. The real question is whether or not its successful listing is a “landmark” for African tech.
A landmark is defined as “an event or discovery marking an important stage or turning point in something”. My feeling is that Jumia’s IPO is, for now at least, basically a one-off.
U.S. IPOs and funding like the amount Jumia raised are not a reality for anyone else right now. There is no reason to believe that just because Jumia did it now, others will be able to follow anytime soon.
Other African e-commerce startups are scrambling around for much smaller amounts of money. This may be portrayed as a landmark deal, but a U.S. IPO or $200 million funding round is unlikely.
Also up for debate is whether or not Jumia is even a good investment. For all the noise, the company is still not profitable and has racked up cumulative losses of $935 million.
Rebecca Enonchong, founder and CEO of AppsTech, and one of the main proponents of the “Jumia is not an African company” argument, said she believes the IPO is merely a “desperate exit for existing investors who are obviously running out of cash.” It’s obvious the company had been unable to find new institutional investors, Enonchong said.
While Jumia’s co-CEOs say losses are bottoming out, the fact remains that e-commerce in Africa is a very long-term game with serious challenges in areas like logistics and payments. There is no guarantee of success and so far the failure column is better stocked.
Indeed, the company said in its IPO documents that continued losses mean it cannot guarantee it will achieve or sustain profitability – or pay any cash dividends – in the foreseeable future. Investing in Jumia is a gamble.
Jumia’s “landmark African IPO” may not be as landmark or as African as some people are trying to make out. The high risk of investor losses rather than returns could actually hinder investor confidence in Africa rather than bolster it.
Tom Jackson is co-founder of Disrupt Africa, a news and research company focused on the African tech startup ecosystem.