What makes Jumia an African startup?

by MMC
0 comment

News from Jumia depot to take away public on the New York Stock Exchange last week raises questions about what defines a startup as African.

While the company runs the largest e-commerce business in Africa with operations in 14 countries including Nigeria, Kenya, Morocco and Egypt, it is incorporated in Germany, headquartered in Dubai with its team central technical based in Portugal and, as its IPO Filing shows, will be listed in New York.

Being a “German joint stock company” likely means that it will pay the majority of its corporate taxes in Germany, but its subsidiaries will also pay local taxes in most countries. “There is not enough clarity on this issue,” says Aly-Khan Satchu, a Nairobi-based financial and investment analyst. “It’s called essentially African because its operations are in Africa, but its property and much of its infrastructure is not on the continent.”

Then there remains the question of its founders. Jumia was co-founded in 2012 by Sacha Pavoine and Jeremy Hodara, two former French partners at McKinsey specializing in retail, packaging and e-commerce within the consulting firm. Aged 38, he comes from the traditional background of many French executives via Parisian business schools. They opened shop in Nigeria in 2012 alongside Tunde Kehinde (Nigerian) and Raphael Kofi Afaedor (Ghanaian) who both left the company in 2015.

The other member of Jumia’s senior management is financial director Antoine Maillet-Mezeray, 49, also French. Jumia’s new supervisory board is a little more African with names such as Blaise Judja-Sato, the Cameroonian-American founder of VillageReach, Alioune Ndiaye, the Senegalese managing director of Orange Middle East and Africa and Jonathan Klein, the co-founder of South African origin. from Getty Images.

It is also worth noting that Jumia management and staff in most countries are mostly local, including country heads.

Thus, Jumia’s identity as an African company is based on the fact that the continent is its main market. This is a categorization often seen in the African tech space for small startups and even long-established tech companies. Research methodology behind the reports on venture financing trends in Africa often use primary markets as the defining standard for startups to cover.

Partech Ventures and WeeTracker, two of the companies that publish annual reports, both include startups that have a primary market in Africa, whether or not they are based or incorporated on the continent. In writing its reports, Nayantara Jha, co-founder of WeeTracker, says the company considered incorporating outside the continent “but quickly realized that the money was being raised for Africa and not only by Africans.”

A growing number of pillars of African technology ecosystems meet these criteria. Zola Electric, the solar energy company with operations in five African countries, has its headquarters in the Netherlands and a technical laboratory in San Francisco. Andela, the software developer training and outsourcing company with campuses in four African countries, is incorporated and headquartered in New York.

But beyond their “roots”, the social and economic impact of these companies in the cities where they operate is significant. For example, while e-commerce was largely uncharted territory before its inception, Jumia has invested heavily to address major infrastructure challenges, including investing in logistics and delivery. It has also developed proprietary online payment technology. Andela’s business model relies on training hundreds of African software developers to become globally competitive and, in the long term, Zola Electric’s solar energy solutions can fill the deficits of a continent that has the slowest rate of electrification in the world.

Identity issues

“My standard for saying a startup is African is simple: the idea comes from Africa and it is founded by an African,” says Victor Asemota, a Nigerian tech veteran and investor.

In some cases, Asemota says, companies incorporated outside Africa or founded by non-Africans are simply seeking to take advantage of the relative newness of innovation and problem-solving in Africa. For some, it’s “using African affiliation as an accessory,” he says. “Their real ambition is to be quickly recognized. »

But this is not always the case, as setting up outside of Africa is also often a practical business choice given regulatory uncertainty in several African markets. Many of the best-known African startups with African founders are incorporated in places like Delaware in the United States for this reason.

“Most international investors face difficulties when trying to inject money into sub-Saharan African countries. They are therefore more comfortable investing in companies incorporated in the United States or in markets they are more familiar with,” explains Seni Sulyman, global vice president of Andela.

Until this “unfortunate” reality changes, Sulyman predicts that more African startups will look to incorporate overseas to maximize access to venture capital, especially as funding pools closer to home are more and more numerous. stay unlocked. “Access to financing is an excellent driver of external integration,” reiterates Jha. “Today, Jumia’s IPO is possible thanks to Rocket Internet (its parent company incorporated in Germany).” But having been incorporated outside the continent, Jumia’s branding as an African company lies in “the public and investor relations that happen at a pretty high and interesting level”, says Satchu. “They want to indigenize their brand (because) successful brands in Africa tend to be adept at indigenization. It’s subtle and clever marketing to cloak oneself in the righteousness of the continent and seek to dilute the fact that one’s property is not on the continent.”

The move could also be rooted in a two-part “defensive” game for market dominance, Satchu speculates. “They are trying to capture first-mover advantage ahead of what will surely be extremely fierce competition with Alibaba and Amazon,” he says.

While Jumia positions itself as African – “the leading pan-African e-commerce platform” – in the S1 filing, the presence of Amazon and Alibaba in the US and China respectively means they will likely be seen as completely foreign by local consumers. The other part of the game would be to “probably look for one of them (Amazon or Alibaba) to take a stake in the company.”

As Quartz previously reported, it is an overall project that many industry insiders see as the end goal of local e-commerce companies. This seems even more plausible for Jumia given its well-documented significant losses: in total, Jumia has already accumulated losses of almost a billion dollars while operating in its African markets.

While seeking to define the identity of a startup operating in Africa, Sulyman advocates not losing sight of the company’s local impact, especially if that company “is a great corporate citizen… where employees are treated fairly , regardless of where they come from or where they come from.” they are.” On the other hand, Sulyman admits that scrutiny is necessary if a company “is purely extractive” or is deemed “misleading for the sake of branding and PR” to rely on the novelty of African technological ecosystems.

But Satchu says it’s “absolutely important” to be explicit about the companies’ identity and roots, regardless. “Many companies in Africa prefer window dressing,” he explains to Quartz. “Hanging the torch on these things has to be a good thing. »

Register at Weekly Quartz Africa Brief here for news and analysis on African business, technology and innovation delivered to your inbox

You may also like

Leave a Comment

afriqaa (1)

The news website dedicated to showcasing Africa news is a valuable platform that offers a diverse and comprehensive look into the continent's latest developments. Covering everything from politics and economics to culture and wildlife conservation

Newsletter Subscribe

Follow Us

Facebook Twitter Instagram Linkedin Youtube Email

u00a92022 All Right Reserved. Designed and Developed by PenciDesign