Jumia Technologies AG, Africa’s foremost e-commerce platform, has announced a strategic shift that will see the company closing its operations in South Africa and Tunisia by the end of 2024.
The move is part of a broader effort to optimize resources and concentrate on markets with stronger growth potential across the continent, such as Nigeria and others. The company’s operations in these two countries, which accounted for a minimal share of its overall business, will be shut down as it aims to achieve profitability and accelerate growth.
In a statement released on Wednesday, Jumia explained that the decision followed a comprehensive evaluation of its performance in Tunisia and South Africa, where it operated under the brand name Zando. The two markets collectively contributed only 3.5% of total orders and 4.5% of gross merchandise value (GMV) for the year ending December 31, 2023, and 2.7% of total orders and 3.0% of GMV in the first half of 2024.
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Jumia’s CEO Francis Dufay addressed the decision, describing the exits as difficult but necessary.
“Since assuming the role of CEO, I have focused on initiatives aimed at strengthening our business and placing us on a path to profitability,” he said. “After a thorough analysis, we made the difficult decision to close down our operations in South Africa and Tunisia. Both businesses account for a negligible portion of our overall operations. Furthermore, competitive and macroeconomic conditions in both markets have limited each country’s growth potential, and their contribution to our overall business has not aligned with expectations.”
The Factors Behind Jumia’s Decision
The choice to exit these markets highlights Jumia’s strategy of reallocating resources to markets where growth prospects are more promising. Dufay emphasized that focusing on the company’s remaining nine African markets—Nigeria, Algeria, Egypt, Ghana, Ivory Coast, Kenya, Morocco, Senegal, and Uganda—would enhance operational efficiency and facilitate growth.
“Decisions like these are never easy, and we are extremely grateful to team members in both countries, who worked tirelessly to serve our customers every day. We are also grateful to our suppliers, vendors, and logistics partners in these markets. We deeply thank them for their hard work and service to Jumia,” Dufay added, acknowledging the impact on the company’s employees and partners in the affected markets.
Jumia’s operations in South Africa and Tunisia were hindered by challenging competitive markets and unfavorable macroeconomic conditions. The e-commerce industry in South Africa, in particular, has witnessed intensified competition from both global and local players, making it difficult for Jumia to gain significant market share. Similarly, Tunisia’s economic environment has faced persistent challenges, including currency depreciation and inflation, which have negatively impacted consumer spending.
By exiting these markets, Jumia aims to streamline its resources and direct investments toward higher-yielding markets. The company believes this will allow for better positioning to capitalize on opportunities in its core markets, where e-commerce adoption is still growing and where Jumia has a stronger foothold.
Jumia’s Recent Financial Performance and Cost-Cutting Measures
The decision to close down operations in South Africa and Tunisia follows a series of strategic measures Jumia has implemented to move towards profitability. In 2023, the company reported a 64% reduction in operating loss, which dropped to $73 million. Dufay, who has been leading efforts to cut losses and improve the bottom line, expressed optimism about the company’s future, indicating that Jumia expects to return to growth this year while continuing to reduce its losses.
“The results of recent quarters have shown clear steps towards Jumia’s strategic focus, positioning it for topline growth and improved cash utilization for 2024,” Dufay noted.
This restructuring is part of a broader strategy to reverse Jumia’s perennial losses. In Q4 2022, Jumia slashed its workforce by 20%, laying off 900 employees as part of its cost-cutting initiatives. The company also discontinued its food delivery business, Jumia Food, which was deemed unprofitable.
What Lies Ahead for Jumia?
With the upcoming exits from South Africa and Tunisia, Jumia will focus its efforts on nine key markets: Nigeria, Algeria, Egypt, Ghana, Ivory Coast, Kenya, Morocco, Senegal, and Uganda. These markets are viewed as having stronger growth prospects, where Jumia believes it can achieve economies of scale and tap into rising e-commerce trends.
Jumia’s renewed focus aligns with its strategy to prioritize markets where it holds a competitive advantage. In Nigeria, for example, the company has maintained a leading market position and enjoys a robust network of logistics and delivery infrastructure. Similar opportunities exist in countries like Kenya and Egypt, where internet penetration and digital payment adoption have accelerated in recent years.
However, while the exit from South Africa and Tunisia may help Jumia optimize its operations, analysts believe the company still faces significant hurdles. The e-commerce landscape across Africa is characterized by infrastructural challenges, regulatory issues, and payment bottlenecks that can limit growth. Additionally, rising inflation rates and currency devaluations in several African economies could further dampen consumer spending.
The company’s cost-cutting measures have been aggressive, and the shift toward profitability will likely require continued adjustments to its business model, including enhancing product offerings, strengthening logistics capabilities, and forging partnerships to improve market reach. Furthermore, Jumia is expected to carefully manage its cash reserves and investment strategies to support growth initiatives in its key markets.