For those with a distaste for the recent trend of bolting together words to make new words, the term ‘Zebracorn’, will undoubtedly provoke a grimace. But in the context of hopes the ‘digital revolution’, will finally start to gain some real traction in Africa, helping kick start the myriad of varied economies across the continent, it should offer hope. Africa has its first billion-dollar technology company.
Last Friday Jumia, the pan-African e-commerce platform predictably compared to Amazon, floated on the New York Stock Exchange at a market capitalisation of $1.8 billion. It becomes the first technology company to come out of Africa to have a valuation in excess of $1 billion – the threshold that qualifies tech start-ups as ‘unicorns’. However, Jumia reached its $1 billion valuation a few months before last week’s flotation, passing the milestone during its final private funding round last December.
Founded in 2012 by four Nigerians, former McKinsey consultants Jeremy Hodara and Sacha Poignonnec plus Kehinde and Raphael Kofi Afaedo, Jumia has become the standard bearer for the potential of Africa’s digital economy. With infrastructure problems and a lack of political stability still dogging the continent and holding back economic development, the digital economy is seen as crucial to progress.
Less dependent on transport links and the local political environment, the digital economy is sure to hold a key role in the development of Africa. As smartphone and internet penetration rise so does the opportunities presented by the digital economy. In Africa, that process is set to be boosted by global internet initiatives such OneWeb and Amazon’s Project Kuiper that over the next couple of years are launching thousands of new satellites. Their aim is to bring affordable internet access to the large swathes of the world that are still unconnected.
For Jumia, and the other digital economy start-ups now springing up across Africa, that represents a huge opportunity. Despite being Africa’s ‘leading’ ecommerce platform, Jumia’s market is a fraction of that of its peers elsewhere in the world. In 2018 just 1% of the continent’s retail sales were made online. That compares to 24% in China and 18% in the UK. On the flipside, the low starting base of internet penetration offers Jumia massive potential for growth.
That’s clearly been recognised by the high profile international investors Jumia attracted pre-IPO. They include Alibaba founder Jack Ma, Pernod Ricard, Rocket and Mastercard. However, the company is still loss making, around $1 billion in total, and it looks like it will be some time before that changes. The company faces many challenges with deliveries and taking payments a lot more complicated than elsewhere in the world.
For now the valuation looks expensive but if Jumia manages to tap into even a modest percentage of Africa’s growth potential over the next decade and beyond, early investors could reap substantial rewards further down the line. As the first African start-up to list on the NYSE, success will also hopefully pave the way for a herd of new ‘zebracorns’ to follow.