Why Now Is The Time To Invest In African E-commerce

Why Now Is The Time To Invest In African E-commerce

Although Africa is all too often viewed by investors and the public at large as being the “dark continent”, more often than not, they are letting prejudices and misconceptions cloud their judgment about some of the most exciting investment destinations available. In 2018 alone, six of the ten fastest growing economies in the world were in the African continent. This prejudice is compounded by the natural tendency for investors to invest in what they know best and are most familiar with, which is often what is in their own country. Globalization has, however, made markets more interconnected, and distance is becoming less of the obstacle it once was. The continent is blessed with strong demographics, considerable natural resources, and increasingly, a more stable political and investment environment for multinationals to operate within. Even traditional hindrances such as poor infrastructure can be viewed as a potential opportunity, particularly in the area of financial services and e-commerce. Jiji, is the largest classifieds business marketplace in Nigeria, it was started from scratch five years ago, by a group of seasoned e-commerce professionals. With a market of 200 million people, Nigeria provides enormous upside should a business take off. The horizontal classified business model (any online business using http) does, according to Goldman Sachs, offer one of the most attractive investment models in the world, along with search engines and social networks. It’s not hard to see why it’s such an attractive model, when the “winner takes it all” model is applied, in certain markets, the number one online classifieds controls over 80% of market share. The size of earnings opportunity equals 6 b.p. of the national GDP with 60% of long-term EBITDA margin. It is also an asset-light business model that requires minimal investment in heavy machinery and ensures high cash flow conversion. The potential upside to the classified business model is particularly evident in a market such as Nigeria that has a young population of just over 200 million people. Nigeria is a mobile-only country (where 90% of traffic is on mobile web and is rapidly shifting to apps) with high and growing Internet penetration. In Africa, classifieds provide the ideal platform for e-commerce, as it enables people to buy and sell both second-hand goods and new ones. Over the course of the last five years, Jiji has become the largest classifieds marketplace in Nigeria. The platform has just over 6 million unique active monthly users and more than 50,000 professional sellers listing over one million items. In 2018, the Jiji app was rated number one by Android users in the Nigerian shopping category, it is currently the highest rated app in Nigerian e-commerce. Having cemented its leading position in Nigeria, the team have set their sights on expanding into new African markets, and recently decided to redirect OLX users in Nigeria to Jiji and to acquire OLX businesses in Kenya, Ghana, Uganda, and Tanzania. After the transaction is completed, Jiji will have a presence in five markets, with 300 million people. In a couple of years, Jiji’s monthly audience is expected to cross the threshold of 10 million users which will make it one of the largest classifieds by traffic. Jiji’s ambition is to build the biggest Africa-based classifieds business, creating a new retail experience for Africa’s fastest-developing countries with a combined population of 300 million. The deal will allow OLX users in these countries to benefit from Jiji’s market-leading products and services. OLX’s reach combined with Jiji’s own proprietary search and delivery algorithms, will give users a radically streamlined experience and ensure the experience of buying and selling goods more convenient and transparent than ever before. Africa has in the past been viewed very negatively by potential investors and businesses in general, however, as technology breaks down barriers to accessing finance and supply chain infrastructure the potential opportunities have never been greater. This combined with greater access to the internet and mobile phones provides imaginative entrepreneurs and businesses a chance to rethink traditional business models and create different systems that cater to the needs of this young, diverse and commercially underserved region. The team at Jiji recognize the potential benefits and opportunities that this region has to offer, only time will tell if other foreign investors recognize the upside African economies have to offer.

Website Promo Hour

Ad close in 20 sec