Africa Watch – Sayonara!

28th October 2024

Jumia Technologies will close its South African online fashion retailer Zando and Tunisian operations by year-end to focus on more profitable markets. CEO Francis Dufay explained that these countries’ macroeconomic challenges, competition, and limited growth potential did not align with Jumia’s strategy. Jumia is reducing its headcount, exiting grocery and food delivery, and focusing on its e-commerce business to achieve profitability. The company will now concentrate on nine markets, including Egypt, Kenya, Morocco, and Nigeria, where it sees better prospects for growth. Success in these regions could help offset the losses from South Africa and Tunisia.

A year ago, the newly appointed Jumia CEO took over the troubled company, losing $167 for every $100 generated in revenue. His strategy involved initial cost-cutting measures focused on workforce and management expenses, resulting in a 60% reduction in losses. However, this also led to a decrease in revenue, necessitating a recalibration of the strategy. In September 2023, he announced that Jumia would shift its focus from cost-cutting to growth by scaling back in certain countries and concentrating on expanding in the Nigerian and Egyptian markets.

The move reflects Jumia’s pragmatic focus on optimising its presence in more promising markets while exiting those with less favourable economic conditions, strong competition, and low growth prospects. CEO Francis Dufay’s explanation that South Africa and Tunisia no longer align with the company’s strategy highlights the challenging macroeconomic environments in these countries. In both markets, sluggish medium-term growth, increased competition, and logistical complexities likely limited Jumia’s ability to scale efficiently.

By refocusing on its nine remaining markets, including key economies such as Egypt, Kenya, Morocco, and Nigeria, Jumia is channelling its resources toward regions with greater profitability and long-term success potential.

In the broader context of Africa’s e-commerce sector, Jumia’s pivot also reflects the ongoing challenges of sustaining profitability in an industry marked by high operational costs, regulatory hurdles, and varying digital infrastructure across different markets. By concentrating on markets with better growth trajectories and focusing on core offerings. This strategy is now being implemented, and it remains to be seen, particularly in light of the current macroeconomic headwinds in Nigeria, whether it will deliver the growth and turnaround the company needs.