Troubled on global stage, Jumia Uganda seeks profitable 2020

Monday January 13 2020

Jumia Uganda will have to work extremely hard to untangle itself from the company’s global problems in order to return a profit in 2020. FILE PHOTO

Last year was a tough year for Jumia on the global stage but now Africa’s largest online store must focus on how it returns a profit this year.

In the year ended December 2019, Jumia decided to exit Rwanda, Cameroon and Tanzania citing the need to “focus resources” on other markets as part of an “ongoing portfolio optimisation effort.”

Simply put, the company sought to cut back on costs by focusing on markets where e-commerce is expected to have higher margins.

In Uganda, Jumia continues to occupy a sizeable part of the online conversation with the e-commerce platform, according to Ron Kawamara, the Jumia Uganda chief executive officer, readying itself to its investments and core business coverage in 2020.

Looking ahead, he say: “We continue working hard on our roadmap to profitability; by for instance, continuing to invest in infrastructure (warehouse, logistics), marketing and management”.

However, he does not reveal how much the company will invest but notes that focus on core operations, driving consumer adoption and engagement will be key features in 2020.

Jumia pay, which is a third party payment platform with potential to provide financial services such as lending, will, according to Kawamara be introduced in Uganda this year.


The service is currently present in six markets including Nigeria, Egypt, Ivory Coast, Ghana, Morocco and Kenya.

Jumia Uganda, according to Kawamara, is on the rise. “Uganda is one of our fastest-growing markets and we see fast growth across all the Jumia verticals,” he says.

However, without the actual performance numbers, which we were unable to obtain from the company, it is difficult to offer a critical analysis of the e-commerce’s financial standing.

But the fact that it was not among the subsidiaries that were exited at the close of 2019 gives credence to Kawamara’s claims.

In run-up to its listing on the New York Stock Exchange in April last year, Jumia was proclaimed Africa’s Amazon.

Whereas, the Jumia Group mobilised close to $280.2m to its balance sheet through the share float, it has been from the exchange that the e-commerce platform has experienced financial bleeding.

Before the ink would dry, the Jumia stock, which had attacked lots of activity, was almost sunk by a report authored by Citron dubbed ‘Not all IPOs are created Equal’.

The report outdated Jumia as having been riding on fraud by inflating its active consumers and active merchants numbers by about 20 to 30 per cent.

Jumia was also accused of failing to make disclosures that 41 per cent of its orders across its operations were returned, not delivered, or cancelled.

“Assuming 41 per cent of orders were returned, not delivered, or cancelled in 2018, this implies that almost 30 per cent of orders were cancelled in 2018. Since Jumia primarily sells consumer electronics, which should not have this high cancellation rate, it reeks of fraud,” the report said.

The impact was instant. The share price that had peaked to $46.99 in the first week of trading, tumbled like a pack of cards to only $5.72 currently.

The report had further indicated that between 2015 and 2018, Jumia had made little progress in its core business with revenues declining from $145m to $131m while adjusted earnings before interest, tax, depreciation and amortisation (Ebitda) went from $161m to $150m.

The seemingly endless list of fraud allegations drew legal action against the company by big wigs in the financial markets such as US investments fraud investigators Holzer & Holzer to launch a probe into the operations of Jumia.

“Since May 2019, several class action lawsuits have been filed against us. The claims in these cases relate to alleged misstatements and omissions in our initial public offering prospectus and statements made by our company in connection with our initial public offering. These actions remain in their preliminary stages,” a statement by Jumia while releasing its 2019 quarter three results, said.

Jumia also suffered losses resulting from the unearthing of corruption by the JForce Program, a sales consultants hired in Nigeria.

The company identified several JForce agents and sellers who collaborated with employees in order to benefit from differences between commissions charged to sellers and higher commissions paid to JForce agents.

South African-based telecom giant - MTN – is one of Jumia’s biggest shareholders. The telecom had plans to divesting from Jumia but the tumbling share price has been a push off.

MTN which was waiting to offload its 18.9 per cent stake valued at about $94.3m last year, said the drop in the share price was regrettable and had made the stock unattractive investment.

Jumia’s operating losses are towering. The company’s operating losses have grown from €45.5m in the first quarter of 2019 to €54.6m in the three months ending September 2019.

The loss was attributed to an increase in general and administrative expense, which includes share-based compensation expense and an increase in the fulfillment expense.

Share-based compensation is a reward offered by the company to employees by way of giving them equity ownership rights.

However, the company had €291.2m of cash on its balance sheet, including cash & cash equivalents of €227.1m and €64.1m of Term deposits.

International analysts however say, the cash deposits cannot sustain the company’s operations for long.

In its third quarter results, Jumia also said general merchandise value increased by 38.7 per cent from €198m in the third quarter of 2018 to €275m in the third quarter of 2019, on the back of sustained volume growth on the platform.

The number of annual active consumers as of September 30, 2019 was 5.5 million, up from 3.5 million a year ago and up from 4.8 million at the end of the second quarter of 2019.

The e-commerce platform also grew its revenue to €40.1m from €33.6m in the same period last year.

Mr Micheal Niyitegeka, the Uganda, International Computer Driving License country manager, says Jumia suffers from many challenges including poor quality of products sold, competition in the market by other service providers as well as a low yet budding community embracing e-commerce in Uganda.

The e-commerce platform will be a sight to see, in 2020, on whether the wind blows “Africa’s Amazon” to sustainability or to the angry den of investors.