Have a restful weekend.
Now to the stories of the week
Jumia’s next move
Africa’s largest retailer, Jumia appears to have created another business unit by spinning its in-house logistics arm (starting with Kenya) into a full-blown logistics entity that will now cater to external clients -- individuals and businesses. Prior to now, it only handled deliveries for the e-commerce platform and Jumia Foods.
Moves made in the past year
As part of its restructuring efforts, Jumia has exited several underperforming markets (Tanzania, Cameroun), gave up Jumia Travel to Travelstart, spun its in-house payment platform, Jumia Pay, into a proper fintech product, dabbled into micro-lending (giving out quick personal loans) in Nigeria, and ventured into advertising in Kenya. Phew! Now that’s a lot.
Recent move and Africa’s needs
Transportation and storage is an important aspect of commerce, but poor infrastructure (bad roads) is currently holding back the growth of Africa's logistics markets. As per global property consultancy Knight Frank, the cost of transport takes up 50-75% of the retail price of goods. Also, farmers in African countries like Nigeria often expect only 50% of their produce to be delivered to distributors or buyers in a sellable condition.
In 2019, Jumia processed 20 million packages with 25% deliveries in rural areas through a network of over 6,500 direct agents and 3,000 warehouse operators. It’s looking to expand this reach to meet the current unmet demands of the African Market.
Why does it matter?
Jumia appears to be on a quest to diversify its revenue stream: E-commerce, Food delivery, Advertisement, Microloan, Payments and now Logistics. Is it spreading itself out too wide or just taking advantage of opportunities?
If this works out, it’d be a win for Jumia possibly making it more profitable and also for other commerce players, an alternative logistics option.
Takes three to tango
From a lengthy trade halt to a war of words over the origin of the coronavirus, to greater scrutiny of Chinese firms on Wall Street, the relationship between the U.S. and China has been strained in recent years. More recently, the situation escalated after China proposed a new security law for Hong Kong, a semi-autonomous Chinese territory that has a special trading relationship with the U.S. The two countries are beginning to compete for the allegiance of the rapidly growing economies of the world.
Power changing hands
Africa has become the fastest urbanizing region on the planet, boasting seven of the 20 fastest growing economies in the world in 2017, according to the IMF. Between 2002 and 2008, trade between the U.S. and Africa grew to $100 billion.
Fast forward to 2017, the tides change as African trade with the US values at $39 billion while the continent’s trade with China is valued at $148 billion.
A key reason for the fall in the US - Africa trade is a shift in American energy demand. At its peak in 2008, the U.S. imported $99.5 billion of oil and gas from the continent. In 2018, this figure had fallen to just $17.6 billion.
Another challenge is the relatively high cost of U.S. export products such as cars, machinery and airplanes, versus China’s production of goods for a comparatively diverse range of income levels.
Why this matters
As African economies have taken a wild hit due to falling oil and commodity prices, tourism and weaker currencies, The US recently accused China of seeking to tie Africa up in debt, but China has put itself forward as just a development partner.
Battle for Allegiances
In the battle for allegiances, Kenya is negotiating a deal with the US to secure market access to Kenya’s agricultural sector and duty-free access for US apparel. Trade between these countries totalled $1.1 billion in 2019. China is also working with African countries bilaterally to suspend African debt payments until the end of the year with the option of extension.
Three’s not a crowd
Chinese infrastructure projects in Africa which have totalled $2 trillion since 2005 can aid US businesses to move its products within the continent’s developing transportation network.
The creation of The African continental free-trade zone could also provide a decent opportunity for both superpowers to have wider market access to trade with African countries. This makes a case for a mutually beneficial relationship between all parties.
Worth reading 📚
Quote of the week 💭
“Start where you are. Use what you have. Do what you can.”
– Arthur Ashe
Thank you for reading this week’s edition 💙