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Jumia: African Amazon or African Catastrophe?

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Jumia ecommerce
  • Jumia: African Amazon or African Catastrophe?

Jumia has been lauded as ‘African Amazon’ by the U.S media and declared as a valid means to tap into Africa’s growing internet opportunities.

The e-commerce giant was listed on the New York Stock Exchange last month and quickly gained 76 percent within 24 hours and go on to do 204 percent in the next three days.

The possibility of investing in a startup that has potential to reach 1.216 billion African people propelled Jumia to the top of investment ladder across the world and as expected to the staple of critics, analysts and researchers needed to forever validate and solidify Jumia’s position as the greatest IPO of this generation.

Citron Research, led by Andrew Edward Left, was one of the critics that dug deeper into Jumia metrics and past records.

Citron Research, a short seller, called Jumia a fraud for hiding and inflating key metrics ahead of its IPO despite sharing those original numbers with investors in 2018.

“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,” Citron alleged.

While Andrew Left was banned in 2016 from trading in Hong Kong securities for five years by a tribunal that accused the Citron Research founder of ‘false and misleading allegations’ against a pharmaceutical company, Valeant, in 2012, there seem to be fundamental issues with Jumia.

Jumia has incurred over $1 billion in debt since it was founded in 2012, including $195.2 million on revenue of $149.6 million in 2018. Considering, the African market where infrastructures are poor and most logistics needed for deliveries had to be built from scratch, Jumia will have to burn more cash across its 14 operational countries in Africa before revenue can start picking up.

Also, consumer spending across its key markets are very low, for instance, Africa’s largest economy Nigeria is struggling with growth amid high unemployment rate, especially among the youths, the e-commerce main target audience. Nigeria’s youths unemployment/underemployment is 55.4 percent, higher than the national rate of 43.3 percent.

Perhaps, this is the main reason MTN Group, the largest Jumia investors, is looking to divest from the company and focus on data as stated in its first-quarter report released days ago.

MTN Group is the largest telecommunication in Africa, as such, have access to more information regarding Jumia and the opportunities on the continent than average investors. Therefore, it is surprising that MTN is divesting despite knowing Jumia have access to 400 million internet users across all its 14 operational countries.

While passionate African entrepreneurs, investors, and advocates have rallied behind Jumia, it would be reckless to overlook compelling facts and lack of enough information on the part of the company.

Investors and stakeholders have right to know if Jumia hid 41 percent returned orders previously stated in a Confidential Investors Presentation in 2018. Growth blueprint or is Jumia just banking on Africa’s potential story without a solid plan to reduce the numbers of fake products on its platform, improve payment service, enhance delivery time and put in place a global standard customer service?

The danger of Jumia Failure to African Startups

Jumia situation will further throw more lights on the complexity of doing business in Africa and the limitations of African startups. Companies like Konga, another Nigerian e-commerce startup looking to list on the New York Stock Exchange later this year, will struggle, in fact, Konga’s team needs to hold off until Jumia address each of the accusations and not relied on Citi Bank response put out by Andrew Howell, who had previously predicted a 52 percent surged in Jumia shares to investors and possibly struggling to save millions of investors relying on Citibank analysis from almost 50 percent plunged in Jumia value since reaching $46 a unit share.

Until Jumia addresses the current situation with a solid quarter performance and put out a proven growth plan, MTN Group will struggle to relinquish its 19 percent stake in the company as planned.

Other African startups, outside fintech, will have a hard time raising funds until they can convince global investors they can address key issues holding growth back.

Jumia Technologies should put out a statement addressing each of the point raised with proven documents.

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Starlink Pulls Plug on Ghana, South Africa, and Others

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Starlink, the satellite internet service operated by SpaceX, has announced the cessation of services in countries including Ghana and South Africa.

This decision comes as a significant blow to users who have come to rely on Starlink for their internet connectivity needs.

The decision, set to take effect by the end of April 2024, will disconnect all individuals and businesses in unauthorized locations across Africa, including Ghana, South Africa, Botswana, and Zimbabwe.

While subscribers in authorized countries such as Nigeria, Mozambique, Mauritius, and others can continue to use their kits without interruption, those in affected regions face imminent loss of access.

One of the reasons cited by Starlink for the discontinuation is the violation of its terms and conditions.

The company explained that its regional and global roaming plans were intended for temporary use by travelers and those in transit, not for permanent use in unauthorized areas. Users found in breach of these conditions face the termination of their service.

Furthermore, Starlink’s recent email to subscribers outlined stringent measures to enforce compliance.

Subscribers who use the roaming plan for more than two months outside authorized locations must either return home or update their account country to the current one. Failure to do so will result in limited service access.

The decision to discontinue services in certain countries raises questions about the future of internet connectivity in these regions.

Also, concerns have been raised about Starlink’s ability to enforce the new rules effectively. Reports indicate that the company has previously failed to enforce similar conditions for over a year, raising doubts about the efficacy of the current measures.

Starlink’s decision to pull the plug on Ghana, South Africa, and other nations underscores the complexities of providing satellite internet services in diverse regulatory environments.

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Nigeria’s Broadband Penetration Stalls at 42.53% Amid Connectivity Challenges

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Nigeria’s broadband penetration has stalled at 42.53% as of January, according to the latest report.

Subscriptions currently stand at 92.19 million, indicating a significant gap in connectivity, particularly in rural areas.

The Nigerian National Broadband Plan 2020-2025 aims to increase broadband penetration to 70% by 2025, with the ultimate goal of achieving 96% mobile broadband coverage by 2030.

However, this ambitious target requires substantial investment—approximately $461 million, according to a recent report by the Global System for Mobile Communications Association (GSMA).

While the country’s major telecommunications companies, such as MTN Nigeria and Airtel Africa, have invested heavily in expanding their network infrastructure, much of this development has been concentrated in urban areas. Rural and underserved regions face a significant coverage gap, exacerbating the digital divide.

Despite these challenges, Nigeria has made progress in improving its broadband infrastructure. Since 2012, the mobile broadband coverage gap across Africa has decreased from 56% to 13% in 2022, due to significant investments in network capacity and new technologies.

Nonetheless, millions of Nigerians, particularly those in rural regions, remain without access to essential telecom services.

To address this issue, Nigeria’s government established the Universal Service Provision Fund (USPF) in 2006, aimed at bridging the connectivity gap and expanding broadband access to unserved and underserved areas.

The fund provides resources for deploying telecommunications infrastructure in economically unviable regions.

The success of these initiatives, along with increased investments in broadband infrastructure and policies to incentivize internet expansion in remote areas, will be crucial in closing the connectivity gap and improving digital access for all Nigerians.

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iPhone Shipments Drop Amid Resurgence of Android Rivals

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Apple Inc. reported a significant drop in iPhone shipments during the March quarter, reflecting a downturn in sales across China amid the resurgence of competition from Android-powered rivals.

According to market tracker IDC, the tech giant shipped 50.1 million iPhones in the first three months of the year, a 9.6% year-on-year decline that fell short of the average analyst estimate of 51.7 million.

The steep decrease in iPhone sales marks Apple’s most significant quarterly dip since 2022, when Covid-19 lockdowns disrupted supply chains.

This time, the Cupertino-based company faces challenges from resurgent competitors such as Huawei Technologies Co. and Xiaomi Corp.

These firms have rebounded strongly in recent quarters, and their innovative product lines have begun to reclaim market share from Apple in China.

Samsung Electronics Co. regained its position as the top smartphone supplier globally, while Apple ranked second. Xiaomi closed the gap on Apple, shipping 40.8 million units, an impressive 33.8% increase year-on-year.

Transsion Holdings, another key player in the budget smartphone segment, nearly doubled its shipments, showcasing the competitive environment Apple faces.

Nabila Popal, research director at IDC, highlighted the broader shift in the smartphone market, which has recovered from the supply chain disruptions and challenges of recent years.

“While Apple has demonstrated resilience and growth in recent years, maintaining its pace and share in the market may prove challenging as Android manufacturers make strides,” Popal commented.

Apple has a strong brand and loyal customer base, yet its market position may be tested further by the aggressive pricing and innovative products offered by Chinese rivals.

The company’s efforts to sustain its premium pricing strategy may also be challenged as more customers consider switching to Android alternatives.

As the tech industry looks ahead to the rest of the year, Apple’s upcoming earnings report and strategic moves to address this competitive pressure will be closely watched by investors and industry observers alike.

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