Rocket Internet dumps Jumia amidst Covid-19 Growth Opportunities

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rocket internet
  • 1 year ago
  • Posted: April 5, 2020 at 9:25 pm

Jumia was supposed to be Africa’s Amazon, an e-commerce platform operating in a dozen and more African countries enabling the African buyer to order whatever goods needed online. From electronics to fashion to instant foods. Jumia wanted to deliver it all. And it has tried. In countries such as Nigeria and Kenya, Jumia has grown to be synonymous with cheap electronic gadgets and fashion items.

But to deliver its dream, the Africa’s e-commerce giant needed not just to generate revenues, but profits too. This dream seemed to about be realized then in mid last year the company reported a loss of over $1 billion, a loss report that sent its shares in the New York Stock Exchange tumbling down from a peak of $49.77 a share to a paltry price of $2.58 a share.

The ongoings at Jumia have been made more bleak with the decision of Rocket Internet to finally dump the Africa’s Amazon by selling its 11% stake in the company, signalling that Rocket Internet is not interested in the growth opportunities presented by Covid-19.

Covid-19, although a disaster for humanity, presents growth opportunities for online and e-commerce companies given that more than 50% of the world population now operate largely from home, closure of brick and mortar stores including restaurants, electronic shops, fashion stores, and several others. Online companies particularly those majoring in entertainment such Netflix, HBO, Amazon Prime and others have reported exponential growth not just on subscriber numbers but also on hours spent on the platforms.

Amazon, though faced with numerous delivery challenges in the middle of Covid-19, has over the months experienced a surge in online and in-store demand, an experienced that should tell players like Jumia that Covid-19 is providing it with growth opportunities that should be grabbed by open arms – but Rocket Internet, the parent company for Jumia, is not interested in any growth opportunities online and e-commerce players are currently enjoying.

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Rocket Internet instead decided to sell off its 11% stake in Jumia, a move that seems to have helped it recoup part of its investment in Jumia. By March 31st this year, Rocket Internet had $2.30 billion in cash some of which it had received from the sales of the 11% stake in Jumia.

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