The Amazon of Africa Gears up for Mega IPO

Business

The Amazon of Africa Gears up for Mega IPO

Online retail is now perhaps one of the biggest industries in the world, and before long it could become the biggest, which is why it is not a surprise that almost all continents in the world now have their very own Amazon. As far as Africa is concerned, Jumia is the go-to website (or app) for many in some of the biggest economies in the continent and Friday is going to mark the big coming out party for the company as its shares begin trading at the New York Stock Exchange. It is a significant development in its own right since no other African company has ever been listed on the NYSE before.

The company which was founded in Nigeria has operations in Ivory Coast, Egypt, South Africa and Tanzania as well and needless to say, they are going to expand to other nations in the continent following their IPO. Jumia has already raised a total of $196 million this far after selling some of its shares at $14.50 apiece, and it has already become the continent’s first start-up with a valuation in excess of $1 billion. One of the biggest gainers from the listing will be MTN, the African telecom giant which has the biggest holding in the e-commerce company.

Like most online retail start-ups, Jumia has not been able to record a profit since it first went into business back in 2012 and like other similar companies; it has run up big losses so far as well. It has accumulated around $1 billion in total losses since inception and perhaps that is the big reason why that it has decided to go for its listing in the United States, instead of in Africa. Loss-making companies do not often get major investments in conservative capital markets like those in Africa and Europe.

The big thing going for Jumia is that there is a huge prospect for expansion in the continent in the years and decades to come. As a matter of fact, only 1% of the total retail sales that goes on on the continent every year is done online, and there is room for huge expansion. If that happens, then the company could grow manifold. However, Jumia will also have to contend with intensifying competition now. As the Business Editor of the BBC for Africa, Larry Madowo pointed out, “Its initial public offering coincides with the launch of a competing app from global logistics provider DHL allowing consumers in 11 African countries to buy directly from global retailers.”

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