Jumia vs. Citron Research – who is lying?

In September last year, when rumours about Jumia’s IPO first started, we wrote a piece of analysis (in Chinese) with the basic argument that Africa is still in very early stages, as far as B2C e-commerce is concerned.

Jumia’s debut performance at Nasdaq, on 12 April, surprised us – up by 74.72%!

It has dropped a lot since, especially this week:

Citron Research’s report

A key reason for the slump this week, apparently, is a report by Citron Research that claims Jumia is “worthless fraud”, and gives a price target of $0.

Many have analysed the report in great detail, and you can read the original report online. Quite a number of claims in the report are concentrated around fake or inflated numbers – which we believe is a fairly common practice among emerging markets’ e-commerce players (including China’s). Not that many of them are public companies :).

An old friend of ours, who has been running e-commerce businesses in Africa since 2014, told us “it would be really surprising if you do not exaggerate your numbers”. The gap between GMV and NMV can also be quite large in any market where COD is widely practised.

The claimed fraud with regard to Jforce is also not a surprise – Alibaba and Baidu both faced big problems with its ground sales team as well as part of the management before. It’s emerging markets after all.

The bigger question we should ask ourselves is: are all these problems actually of any significance as to Jumia’s potential future cash flows?

Here the bigger issue is, where are we on Africa’s e-commerce market?

Africa is promising but early

Precisely as we explained last year – as far as B2C e-commerce is concerned, Africa as a whole is still in its early days. Trust is still being built, alongside the growth of mobile penetration and affordability of smartphones. In many markets, while the top brass has good purchasing power, they have no problem getting goods from ‘far-flung’ places such as Paris or New York.

Infrastructure is still lacking in many countries (tyranny of distance does not only apply to Australia). With a population that is comparable to that of China, Africa is three times bigger in terms of geographical area.

Many of our friends who have done logistics on the continent have complained about the high cost and lack of reliable infrastructure: it costs more than US$3600 to hire a truck to deliver a container from Mombassa to Kigali, for example.

The continent has a lot of promise – and we believe in logistics and B2B e-commerce the opportunities are immediate. However, to capture the consumers it would take a while.

Jumia knows this well – a key reason why it does everything instead of just e-commerce.

As for Citron’s attacks, some of the Chinese entrepreneurs targeted by Citron actually started a web site called citronfraud.com back in 2012 to fight back. Alas, they seem to have gone on with their lives, and the domain is now used for “Hong Kong style betting”.

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This article was originally published in Chinese on Momentum Works’ WeChat platform.