Jumia

Jeremy Hondara: The Face of the New Jumia

In April 2019 when Jumia got listed on New York Stock Exchange, it was a proud moment for the African e-commerce giant because it was the first company on the continent to do so. The entry into the iconic NYSE underlined Jumia’s growth trajectory and its ambition for future expansion.

Everything went according to plan at the beginning. Jumia listed at $14.50

a share, valuing the company at $1.1bn. Just four days later, its stock hit $49.77, raising its value to an African startup record of $3.8bn.

Jumia’s Fraud Crisis

But the euphoria didn’t last. Less than one year after the historic milestone, the company suffered a spectacular decline that shook it to the roots as a result of allegations of fraud and concealed losses.

What followed was embarrassing fraud lawsuits in New York courts and a public relations disaster over its identity.

The nightmare quickly impacted the company’s share price which plummeted to an all-time low of $2.15 by August.

As a result, the company was forced to pull out of three of its 14 country markets - Rwanda, Tanzania and Cameroon - in quick succession and tried to chart a path to profitability.

And as if that was not bad enough, the company’s original owner, German technology investor Rocket Internet, dumped its entire 11% stake, further worsening the crisis.

“Jumia’s first year on the NYSE is a proper reflection of the value of the company,” said Rebecca Enonchong, a Cameroonian tech entrepreneur and a critic of the firm.

Jumia’s turnaround

This was a make or mar situation for the e-commerce company. However, within a year of the crisis, the company’s fortune dramatically turned around and its share price surged to an all-time high of $69.89 by February of 2020.

(Jumia’s shares now trade at just over $6.20 as of June 17, largely because of the crash in the wider equities market globally).

One man that is credited for the transformation is Jeremy Hodara, Jumia co-CEO. He has steadied the ship by being laser-focused on profitable business models and profitable growth by implementing a system of gradual monetization and cost discipline.

In a recent interview, Jeremy explained that the reason for Jumia’s turnaround in fortune is the determination to create growth opportunities by tapping into new markets and growth possibilities.

According to Jeremy, “The most exciting thing about e-commerce is that first, you build large assets for your own use, but it becomes relevant for other stakeholders over time. For us, we have an application and website with very engaged visitors, and we’re exploring having third-party advertisers who place ads on the platform.

“Our logistics service is also another way. We’re building tools and technology to equip our logistics partners and help them become more productive. This drives our costs per delivery down and is the type of benefit that comes with scaling.”

Hodara has also positioned Jumia to make significant inroads into payment and fintech by investing in JumiaPay which is now a major driver of growth for the company. In Q1 of 2021, the payment platform grew by 21% as payment volume grew from $35.5million to $42.9million.

Who is Jeremy Hodara

Jeremy is a French businessman and one of the four founders of Jumia. The other co-founders are Sacha Poignonnec, Tunde Kehinde and Raphael Kofi. Before starting Jumia, Jeremy used to work at McKinsey in France, India and USA.

It was during his time at Mckinsey that he saw the e-commerce opportunity in Africa and started working towards it.

How Jeremy Started Jumia

With the help of his four friends, Jeremy launched Jumia in Lagos, Nigeria in 2012 and then expanded to other countries across Africa such as Egypt, Morocco, Ivory Coast, Kenya and South Africa.

Jumia whose services have expanded to include E-commerce, Internet, Retail, Marketplace, Payment, Logistics recently announced a partnership with UPS which will enable it to access more than 200 countries.

Having been able to riggle out of its previous crisis, Jeremy says Jumia is now fully focused on adding value to Africa’s largely untapped e-commerce by creating products that engender customer satisfaction. However, the future look a bit trickier for the company following Amazon’s recent entry into the Nigerian market.

In the last two decades, the digital revolution across Africa has been one of the most exciting developments on the continent. Digitisation has become a powerful tool driving socio-economic transformation in the region’s critical sectors responsible for wealth creation and prosperity.

Investments in digital tools inspire and increase efficiency in the production and distribution of goods and services, opening up opportunities for revenue growth for millions of African youths and enhancing connectivity and communication between the government and citizens.

The improvement in the ICT sector now accounts for about five percent of the region’s Gross Domestic Product.

But while Africa may be making some good progress towards closing the gap with the rest of the world in the knowledge-based digital economy, is the region moving fast enough, and where will the continent be in 2032?

Internet penetration as an enabler of growth

The sharp growth of the internet and mobile penetration has been a major enabler for the digital revolution in Africa.

Reports indicate that more than 80% of Africans have mobile subscriptions. This far outstrips the global average of 66.2%. Similarly, as of 2021, about 33% of the continent’s population is linked to the internet.

This has enormous economic benefits for the continent because growth in the mobile segment has so far created more than a 1.7million jobs and has boosted the region’s economy by at least $144billion.

And with the outbreak of the Covid-19 pandemic and the attendant lockdown, which had a telling effect on the continent’s economy, digitalisation has become even more imperative to accelerate economic progress.

Africa is a forerunner in mobile money

Amidst the digital transformation, some African countries are leveraging expanded connectivity and mobile penetration to make a difference in the lives of citizens. Courtesy of the rise of Kenya’s M-PESA, Africa is ahead of other regions in terms of mobile financial services delivery.

According to a report, Mobile money transaction values grew in Africa by 39% in 2021 to US$701.4 billion – making up about 70% of global transaction values, which hit over $1 trillion for the first time in 2021.

On the other hand, Sierra Leone, one of the world’s poorest nations, recently established the Directorate of Science, Innovation and Technology (DST).

The platform includes a “national financial data architecture with embedded automated financial tools” designed to improve service delivery and lower corruption.

Côte d’Ivoire also encourages change by establishing a Research and Development (R&D) tax incentive to steer investments away from commodities to innovation. At the same time, Tunisia has offered state salaries for up to three startup founders per company during the first year of operation, with a window to return to their old jobs if the startups fail.

Alongside these transformations, digital trades are rapidly growing while the Fintech services and cryptocurrencies have become the bedrock for financial inclusion by providing a large number of services to people excluded from the traditional financial architecture.

Africa’s least connected region

But while the transformation in the digital sector is undeniable, Africa still lags behind other regions in vital digital ranking. With 33% internet connectivity and 34% mobile broadband, the continent is at the bottom of the global internet penetration index.

This means Africans have lesser opportunities in the global digital economy when compared with their contemporaries from Europe or America.

“Few citizens have digital IDs, businesses adopting digital technologies remain the exception rather than the norm, and few governments are investing strategically in developing digital infrastructure, services, skills, and entrepreneurship,” says Dr Vera Songwe, Under-Secretary-General of the United Nations and Executive Secretary of the United Nations Economic Commission for Africa.

Hurdles to the digital revolution

However, for Africa to catch up with the rest of the world, it first must identify the key hurdles that undermine its digital aspirations.

Dr Amani Abou-Zeid, African Union Commissioner for Infrastructure and Energy, identified some of these challenges, including a weak coordination framework, low investments in the digital sector, and a lack of necessary infrastructure.

The poor investment in the digital segment is underlined by the fact that while African startups raised $1.2 billion in new capital Investments in 2020 - a six-fold increase in five years - but this only represents less than 1% of the $156 billion raised by US startups in the same period.

On top of that, Africa’s investment in R&D was just 0.42% of GDP in 2019 – less than a quarter of the global average of 1.7%.

Africa needs a coordination framework

Dr Abou-zeid insists that one of the ways for Africa to level up with other regions is through collaboration. She stressed that the region must strengthen its “coordination framework, aligning policies and sector regulation.”

Corroborating this, Dr Songwe encouraged the African leaders to adapt and harmonise legislation on technology, including intellectual property and data privacy, to unleash Africa’s digital potential.

“To address the challenges, the African Union Commission in collaboration with other continental institutions and regional economic communities are working with member states to identify and address barriers to harmonise laws and regulations and drive leadership for necessary reforms that ensure future investment in digital transformation,” Dr Abou-zeid said.

Other experts have insisted that for Africa to reap the full benefit of the digital transformation, the regulatory frameworks must create a clear path to funding for startups.

In a recent World Economic Forum report titled, “Tech Startups Key to Africa’s Digital Transformation but Urgently Need Investment”, the region was encouraged to pass legislation such as “Start-up Acts” designed to spur private sector innovation to embed incentives for startups in legislation, such as startup grants, rebates on efficiency gains through technology as well as invest in workforce education, skills and competencies.

Currently, only 2% of Africa’s university-age population holds a STEM-related (science, technology, engineering, mathematics) degree. So while Africa has attained so much digital transformation in the last two decades, the next decade will be critical in determining whether the continent will match up with Europe and America.