Unicorn joins Africa’s biggest game as internet group’s value romps past $1bn

Africa Internet Group is set to become the continent’s first “unicorn” after securing an investment valuing the ecommerce group at more than $1bn, the Financial Times reports.

French insurer Axa will pay €75m for an 8 per cent stake in Africa Internet Group, which owns several start-ups including online retailer Jumia, mobile taxi app Easy Taxi and delivery app HelloFood, giving the company a valuation of €938m.

There are 151 so-called “unicorns” – private start-ups valued at $1bn – across the globe, according to CBInsights, the venture capital database. But enthusiasm has started to wane in recent months as investors become more sceptical about their lofty price tags.

Growing demand for online products in Africa’s more developed markets has been attracting the attentions of increasing numbers of global investors.

But Africa Internet Group, which was founded in Nigeria in 2012 with a sales approach similar to Amazon’s, is the first African tech start-up to pass the $1bn valuation mark.

“This is very positive news for Africa’s technology scene. It shows we are entering the global market,” said Herman Chinery-Hesse, one of Ghana’s leading tech entrepreneurs.

However, he added: “We should also be wary of importing crazy tech prices before companies are profitable.”

African Internet Group’s valuation could soon be matched by Interswitch, the Nigerian fintech group that pro-cesses payments for banks, if the company decides to float later this year.

After the investment, Axa will be one of Africa Internet Group’s four biggest shareholders, alongside Rocket Internet, Milicom International Cellular and MTN, Africa’s largest telecoms group.

The French insurer is looking to tap into the continent’s fast-developing financial services market and growing use of smartphones by offering insurance products through Jumia.

Smartphones have begun to transform the way Africans live and work. The continent is projected to have 360m smartphones by 2025, when internet penetration on the continent will hit 50 per cent, according to McKinsey Consultants.

Jumia operates in 11 African markets and recorded a transaction volume of €206m in the first nine months of 2015, a 265 per cent increase on the previous year.

Merchants see four-fold sales on e-commerce

Meanwhile, E-commerce companies have redefined the retail business terrain in Nigeria by transforming from retailers themselves, to platforms where other merchants now sell directly to the end users.

Jumia, Kaymu, Konga, Yudala, Adibba, Dealdey, and Taafoo are notable E-commerce sites in Nigeria that are rapidly relocating the conventional marketplace to a virtual marketplace, the Internet.

The growth of these firms has translated to sales growth for thousands of Nigerian small businesses who use the platforms to sell their products, helping to boost returns for the merchants, multiple fold.

“Turnover has increased and I can now sit in my office to do other things (and increase productivity)” said Uzo Mbonu, Managing Director of GSM Planet, a merchant who sells through a number of e-commerce platforms.

Mbonu says three years of selling through e-commerce companies has seen his sales more than double.

The rapid growth of e-commerce in Nigeria is driving this trend.

Nigerian online giant Konga.com reportedly grew its 2014 revenue by 450 percent from 2013. In late 2014, it finalised a funding of $40 million from Investment AB Kinnevik and Naspers. In 2013, its main competitor, Jumia, also received a total of $61 million in funding.  Jumia operates in 11 African markets and recorded a transaction volume of €206m in the first nine months of 2015, a 265 per cent increase on the previous year.

French insurer AXA said on Monday it had taken an 8 percent stake in Africa Internet Group (AIG) owners of Jumia.

Ikechukwu Okafor, Managing Director of Cambistry Ventures Limited, an automotive parts and accessories dealer on several ecommerce platforms describes the advent of technology driven sales as a rewarding source of revenue that has seen his business activities rise phenomenally.

Konga officially launched its third-party retail platform in the first half of 2014, rebranding it as ‘Marketplace’ from ‘Konga Mall’.

By the end of 2014, Konga’s Marketplace featured 8,000 merchants, beating internal targets of 1,000 merchants eight-fold.

Similarly, Jumia has an online marketplace for Small and Medium Enterprises. Jumia’s marketplace is reported to make it possible for the company to reach over 100,000 visitors daily with its numerous sellers and products.

These companies, along with other emerging e-commerce platforms continually develop ways of making their websites more user and seller friendly.

“With Jumia’s former seller platform, there were little delays in uploading products. But, with the new seller centre, there have been improvements which make operating easier,” Sadiq Adams, CEO of Rogue Inc., a clothing company which sells its products mostly on Jumia, told BusinessDay.

MOBOfree.com a social marketplace, in December 2015 announced a 274 percent year-on-year increase in the total value of goods on their platform in Nigeria to $1.97 billion (N394 billion), up from $526 million (102.5 billion NGN) in 2014.

The online marketplace allows people to buy, sell and swap products and services with other trusted people. Mobofree had more than two million monthly active users and over 500,000 active classifieds in Nigeria, as at the end of 2015.

Patrick Adediran, Director at Don Bosco Nigeria, says the advent of e-commerce has eliminated the need to employ numerous marketers who have to traverse the nooks and crannies of the city in search of prospective buyers.

“E-commerce has overcome the barrier of distance between buyers and sellers,” Adediran said.

One challenging area for merchants though, was VAT remission BusinessDay enquiries reveal businesses are required to provide their Tax Identification Numbers (TIN) to the e-commerce companies for onward remission of five percent VAT, a fee which some complain is not being credited to their TIN accounts.

Another source of worry for merchants is incidents of fraudulent buyers. Most of the sellers companied of people who make orders, receive them and come up with one reason or the other to return products.

Regardless, these challenges however, e-commerce driven businesses are poised to maintain an upward trend. Nigerian internet users have risen from 4.9 million in 2005, to 67.1 million today.

“The e-commerce sites have made life easy for both the unemployed and employed individuals who are not satisfied with their monthly earnings. It is not time consuming and it can be managed well, regardless of how demanding your regular job is,” said Gloria Iheanacho, CEO of Gloria Ventures, a dealer in office equipment and home appliances.

CALEB OJEWALE & CHINWE AGBEZE with agency reports