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Zambia’s election, Jumia’s continued losses and diversification

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Jumia’s continued losses and diversification

We’re officially in reporting season for the second quarter of 2021. African eCommerce giant, Jumia revealed its numbers this week. Here are some key highlights:

Increased revenue and loss: It recorded revenues of $40.2 million, up 4.6% on a year-over-year basis, while operating loss of $51.6 million in Q2 2021 was up 24.7% from $41 million loss in the first quarter of 2021. The cause for the increase in losses was due to an increase in advertising and marketing, a move that the company expects to pay off in the long term.

Diversifying marketplace and gross merchandise value (GMV): Over the past three years, Jumia has been working to diversify its marketplace, which significantly consisted of phones and electronics, and there are signs that this diversification is working. 

Everyday products such as groceries now make up 63% share of GMV, up from 41% three years ago, while phones and electronics account for 33% of GMV.

Jumia identified Food delivery, Fashion and JumiaPay as its fastest-growing product categories.

More jobs and diversifying revenue stream: Jumia announced that it’s partnering with the National Bank of Egypt to help out with its payment platform development. A move that will help diversify its revenue streams. Jumia is also investing in expanding its tech talent by 40% and expanding its tech hub in Cairo. 

“Our Cairo hub will host over 100 tech professionals and will include dedicated teams to front-end projects,” Jumia’s Co-CEO Jeremy Hodara said.

Jumia’s logistics (delivery) offering to third parties, which was launched about a year ago, has taken off to a good start. 1.3 million packages were delivered in Q2 2021, compared to 0.5 million packages in the full year 2020 on behalf of over 300 clients. 

Looking forward: For Jumia an increase in losses, looks like a setback for its nearby profitability goal but Jumia’s Co-CEO, Sacha Poignonnec thinks otherwise.

“Many of the investments we are making now are long-term in nature, and we will take no shortcut in pursuit of quick wins”. This is something to really watch out for. 

Zambia’s election

On Thursday, Zambians were at the polls. The competition for the country’s number one political position is between a 64-year-old Lungu who has been in power since 2015, and Hakainde Hichilema — popularly known as “HH” — a businessman who is a critic of the incumbent’s economic management.

What’s different about this election?

Internet shut: This year alone, at least eight African countries have experienced partial or total internet shutdown. Zambia made the number nine as the Zambian government restricted access to social media platforms including WhatsApp, Facebook, Instagram, and Twitter. 

Investors and IMF are watching as Zambia is heavily indebted.

As per Reuters, “Zambia owes in excess of $12 billion to external creditors and spends 30%-40% of its revenues just meeting the interest payments on its debt, credit rating firm S&P Global estimates. Its debt-to-GDP ratio was near 120% last year, one of the highest in emerging markets and probably double the level considered to be manageable.”

Possible results: While the votes are still being counted, Zambia's opposition leader Hichilema has taken an early presidential election lead.  While Hichilema has shown a desire to tackle the debt problems and engage with investors, Lungu's Patriotic Front (PF) for years sought to avoid an IMF programme

In a nutshell: Investors may see a potentially clearer path to an IMF programme and a debt restructuring under HH. This might only be possible when the elections have been won already. May the best man win.  

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