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African E-Commerce Struggles to Scale, While Tech Logistics Companies Attract Capital
By Andrew Larsen | Wed Feb 15 2023
An update on Africa’s logistics market intelligence, trends and asset-light tech innovation
The Founders of E-Commerce and Logistics Giant Jumia Resign
In November, after five years of successive losses, the founders of African e-commerce giant Jumia resigned. The joint resignation came just 10 days before a rocky third quarter financial report.
The company also moved its remaining executives to Africa to account for the rising rent prices of their original Dubai headquarters. Moves like these underscore the issues multinational companies face operating in Africa as currency devaluations, limited access to foreign currencies and heavy government control on imports can continually undermine a business' success.
These moves came just as Jumia's stock price dropped by 68% from its high-profile New York IPO in 2019. In 2022, the company suffered from currency devaluation in the markets where it operates, undermining revenues. For example, according to TechCrunch (Q3 2022), “the Nigerian Naira, Egyptian Pound, and West African CFA depreciated by 5%, 14% and 13% respectively against the dollar during the nine-month period ending September 30, 2022.”
In response, Jumia will emphasize capturing local stock, reducing the need to import items with foreign currency —which governments heavily regulate. The company also intends to shift its monetization model from commission charges to offering value-added solutions like advertising and building a stronger local supply of goods, according to Franics Dufay, the current acting CEO.
Finally, Amazon has plans to launch in additional African countries in 2023, including in Nigeria and South Africa, putting increased pressure on Jumia. Importantly, Amazon's first African venture in Egypt, which launched in 2017 with Amazon’s acquisition of Souq, has had mixed success as the global e-commerce company struggled to adapt itself to local markets and expectations.
Rwanda's EV and E-Mobility Solutions Struggle Despite Government Push
What’s happening: EV and e-mobility solutions have struggled to scale in Rwanda, despite heavy government investment and private sector incentives in recent years. While private investments have grown e-mobility solutions throughout Rwanda, limited charging infrastructure, poor local roads and a lack of support for EVs outside of Kigali have prevented e-mobility solutions from scaling beyond the country’s capital.
Government incentives include low charging costs, tax breaks on imports of any e-vehicles, equipment or materials required to develop charging infrastructure and rent-free public land to set up charging stations. At the same time, development agencies have contributed to infrastructure development in support of private sector companies. For example, in 2021 Ampersand, an electric motorcycle company in Rwanda, secured a $9M debt facility from the U.S. Development Finance Corporation to help it scale by installing additional charging stations and purchasing new batteries.
Bottom Line: While the government and private sector have made efforts to advance EV and e-mobility solutions in Rwanda, the current challenges the sector faces highlight the difficulties that will impede the widespread adoption of EVs throughout sub-Saharan Africa in the near term. EVs are a necessary step towards reducing carbon emissions but current limitations such as high vehicle costs, limited charging infrastructure and poor road infrastructure are crucial obstacles that must be addressed to ensure their success.
Kapu Secures $8M in Seed Funding Led by Giant Ventures and Firstminute Capital
In December, tech newsletter TechCrunch reported that e-commerce startup Kapu, led by former Jumia executive Sam Chappatte, received $8M in a seed funding round co-led by Giant Ventures and Firstminute Capital with participation from Founder Collective, Base Capital, Norrsken and Raven One.
Kapu’s solution digitizes the informal retail sector in Kenya. While recent startups including Wasoko (formerly Sokowatch) and MarketForce seek to solve B2B logistics problems for small informal retailers, Kapu takes it a step further, creating direct B2C linkages which reduce grocery prices for Kenyan consumers. Strengthening linkages like these throughout Africa will greatly reduce costs to consumers. Throughout African markets, middlemen typically create these market linkages at high costs, playing the role that scalable technology should replace at a much lower cost to consumers. It is unlikely that Africa’s informal retail sector will formalize in the near term, but investors and companies that recognize and embrace it could become near-term winners.
The Logistics Brief is a report on African logistics market intelligence. It focuses on trends and provides updates on asset-light tech innovation in the sector.
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