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Jumia: African Amazon or African Catastrophe?

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  • 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.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial market.

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FG Implores Parastatals to Promote the Country’s Digital Economy Initiative

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FG Tells MDAs to Promote the Country’s Digital Economy

The Ministry of Communications and Digital Economy under the management of Dr. Isa Pantami, has implored all the federal government parastatals to promote and safeguard the country’s digital economy initiative.

Dr. Isa Pantami, while presenting the keynote address in a virtual forum organised by the Association of Telecoms Companies of Nigeria (ATCON),  said based on the negative effects of COVID-19 pandemic, the demand for critical data infrastructure and broadband is now high.

The minister urged government parastatals to put in effort to uphold and promote government’s digital economy initiative designed to reduce the effect of the pandemic on the nation. He also disclosed that the interests of all Nigerians would also be protected by the government.

Federal government will continue to develop its digital economy policy for a digital Nigeria. Both the Nigerian Communications Commission (NCC) and the National Information Technology Development Agency (NITDA) that are under the supervision of my ministry, now have special departments that promotes digital economy initiative and I urge them and all other parastatals under my supervision, to ensure that they promote the digital economy initiative of the federal government in order to maintain investor’s confidence and to protect the interest of Nigerians, especially telecoms consumers.

Government on its part will ensure that the interests of telecoms companies and the interest of Nigerians are protected. Government is currently addressing the challenges in the cost of investments such as the issue of vandalisation of telecoms infrastructure, and President Muhammadu Buhari has officially directed all security institutes, through the Office of the National Security Adviser (ONSA), to protect telecoms investments in the country,” Pantami said.

The Executive Vice Chairman of NCC, Prof. Umar Garba Danbatta, when making his presentation said “The COVID-19 pandemic rapidly and sharply ravaged the globe, Nigeria is no exception. Governments therefore, faced unprecedented challenges from COVID-19 pandemic. The impact affects most sectors of the global economy, ranging from health, to education, to finance, to trade and investment.

While explaining the Commission’s efforts at resolving consumer-related issues, Danbatta noted that less than 500,000 people activated Do-Not-Disturb (DND) code as at 2015 when the code was introduced by the Commission but presently, over 22,722,366 people line on the code.

He also made it known that the commission has resolved 98 per cent of service-related complaints received from telecoms consumers from January 2019 to April 2020.

according to Danbatta “the Commission has monthly engagements with operators as well as quarterly industry working group on Quality of Service and Short Codes, and is currently monitoring 2G Key Performance Indicators, while the KPIs for 4G are being prepared.

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Union Bank, Awarri Partner to Launch ‘Next Robotics Legend’ Initiative

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Union Bank Partners Awarri to Train Kids on Robotics, Artificial Intelligence

Union Bank of Nigeria Plc and Awarri, a pan-African technology company, has announced the commencement of the ‘Next Robotics Legend’ initiative.

The training program organised through the banks’ education platform, Edu360, will train students between 11 and 16 years of age in Artificial Intelligence and Robotics.

Union Bank said the training is in line with its mission to boost education in Nigeria through its Edu360 platform, saying the Next Robotics Legend initiative would identify and nurture young innovators necessary to address some of the challenges confronting the nation and the world at large.

According to the bank, entry for the initiative will start on August 7th, 2020 and closed on August 21st, 2020. Parents and guardians of qualified students are, therefore, advised to register their children on Edu360 website as soon as possible.

It added that the top 25 entries will participate in the intensive 3-month training programme and each of the participants will receive a tablet with preloaded information; a MekaMon, a robot, which offers an unparalleled education experience in advanced robotics as well as access to seasoned tutors for the programme duration.

Participants are required to identify a need in their community, and apply the skills learnt to provide a solution to societal need at the end of the free training programme. Admission for a mentorship program with Awarri awaits the student with the best solution.

Ogochukwu Ekezie- Ekaidem, the Head, Corporate Communications and Marketing at Union Bank, when speaking on the Bank’s partnership with Awarri said, “Edu360 is excited to work with Awarri on this initiative because this links three areas that we are passionate about – Education, Innovation and Talent Development.

Our focus on these three areas stems from the realisation that they are crucial in driving development and sustainable impact in Nigeria.

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Twitter Approaches TikTok for a Possible Merger Deal

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TikTok, Twitter in Merger Talks

Following President Trump’s decision to end TikTok reign in the United States and protect the American people against an ‘unusual or extraordinary threat,’ Twitter has approached ByteDance, the Chinese company that owns TikTok to discuss possible merger or acquisition, according to a Wall Street Journal report on Saturday.

President Trump had signed an executive order on Thursday under the International Emergency Economic Powers Act, a law that allows the president to regulate international commerce in an unusual or extraordinary threat.

Part of the executive order read “The spread in the United States of mobile applications developed and owned by companies in the People’s Republic of China continues to threaten the national security, foreign policy, and economy of the United States. At this time, action must be taken to address the threat posed by one mobile application in particular, TikTok.”

Last week, Trump had given TikTok 45 days to sell off its US operations to an American company or face a complete exit from the world’s largest market. Also, American companies are warned to stop doing business with the Chinese video app and other Chinese owned social media companies like WeChat, saying it “threaten the national security, foreign policy, and economy of the United States.”

The threat has led to American companies approaching the Chinese short video app for complete acquisition of North American operations.

Microsoft had announced last week that it was in talks with the company to acquire its US, Canada, Australia and New Zealand operations. On Thursday, Financial Times reported that Microsoft has expanded discussions to TikTok entire operations.

However, on Saturday the Wall Street Journal reported that Twitter is in preliminary discussions for a merger with TikTok. A move that would likely allow Twitter to manage the company’s North American operations in line with Trump’s demand.

Trump had accused Chinese owned companies of working with the Chinese government to access American key data and expose the world’s largest economy to security threats. An accusation the companies have denied over and over again.

While it is uncertain how Twitter plans to raise the money for the acquisition or merger, it would be a herculean task given the company’s present financial position when compared with Microsoft.

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