When Jumia Group opened its Cameroon subsidiary in 2014, it promised to make buying items easier for both residents and citizens. But little did it know that providence had another plan for one of African leading e-commerce platforms. Five years on, the group has suspended its e-commerce platform operations in the Central African state after it did same in Gabon, Congo, and Rwanda.
Jumia reportedly shut down in Cameroon as the group believes the operations in the country was not lucrative.
The company’s e-commerce platform consists of its marketplace, which connects sellers with consumers; its logistics service, which enables the shipment and delivery of packages from sellers to consumers; and its payment service, which facilitates transactions among the active participants on its platform in selected markets.
The closure of the company’s operation in Cameroon has left only Jumia Deals operation in the country. Nairametrics confirmed this after visiting the Jumia Cameroon website.
Is Cameroon the problem?
While reacting to the shutdown, Jumia said, “We came to the conclusion that our transactional portal as it is run today is not suitable to the current context in Cameroon.”
[READ MORE: Q3 ’19: Jumia grows revenue by 52%]
Another source told Reuters that Jumia said, “We wanted to see how the business evolved. We can come back, but for now, we’re closing (to have) time to study the market.”
However, the political tension in Cameroon, where citizens have been experiencing uprising for two years, places Jumia in a disadvantageous position. Also, the country’s snail-like economic growth poses a threat to Jumia and other establishments.
In November, the International Monetary Fund (IMF) said economic growth in Cameroon was likely to slow to 3.9% this year from 4.1% in 2018 due to a subdued performance by the country’s non-energy sector. This is expected to affect the purchasing power of Cameroonians.
Jumia’s problem is beyond Cameroon
Jumia’s challenges are not just about the economic situation in Cameroon, as the company has also shut down its subsidiaries in Congo and Gabon. It also stopped operation in Rwanda to focus on QSR. This continuous winding up seems to be supporting the argument that Jumia grew too fast beyond its capabilities. And growth is not the same as profitability which Konga (its Nigerian rival) says it would achieve before Jumia.
The move by Jumia to close its Cameroon subsidiary has been cited as an attempt to cut down on its operational cost as it plans to meet its profitability projection by 2022. Although the company didn’t factor in financial losses despite operating loss increasing by 34.6% from €40.6 million in the third quarter of 2018 to €54.6 million in the third quarter of 2019, since entering the e-commerce business in 2012, it has lost about N362.3 billion ($1 billion).
Jumia as a Group is facing class-action lawsuits in the United States. The group was accused of disclosing misleading information in its favour in order to portray it as a healthy company to investors. The accusations have been taking a toll on Jumia’s stock on the New Yock Stock Exchange (NYSE) where it had opted for an unusual listing of its shares.
Where next? Jumia’s shutdown in Cameroon begs the question, ‘where next?’ The company is scaling back on its e-commerce operation in Africa. This move will leave its workers in Tanzania and Uganda jittery, but this would likely not affect Nigeria, which serves as one of its major revenue drivers. However, the Nigerian operation is not without its own financial issue, as it was also rocked by a $17 million fraud.
Nigeria only hit 56% of its target revenue in first five of months of 2020
Nigeria’s earnings in the period were N1.48 trillion which is 56% off its main target.
Nigeria’s Minister of Finance, Zainab Ahmed revealed that Nigeria was only able to meet 56% of its target revenue from January to May as the global oil price crash affected government revenue due to the COVID-19 pandemic.
Nigeria’s earnings in the period were N1.48 trillion which is 56% off its main target, crude oil revenues accounted for half of Nigeria’s revenues, while non-oil revenues made up the rest in the first 5 months of the year.
On Friday, President Muhammadu Buhari signed the new 2020 revised budget of N10.8 trillion with the crude oil benchmark reduced from $57 per barrels in the earlier budget to $25 in the new budget.
The Minister said the budget had to be revised because of the effects of the COVID-19 pandemic on Nigeria’s economy. She added that Nigeria’s crude oil production would be an average of 1.86 million barrels per day next year and rise to 2.09 million the following year.
“Although Nigeria’s total production capacity is 2.5 million barrels per day, current crude production is about 1.4 million barrels per day — in compliance with the Organization of the Petroleum Exporting Countries’ production quota – and an additional 300,000 barrels per day of condensates, totaling about 1.7 million barrels per day,” she said.
African Union begins COVID-19 vaccine trial group
CONCVACT plans to capture more than ten late-stage vaccine trials at the earliest.
The African Union Commission just recently facilitated a program called the new Africa Centres for Disease Control and Prevention (Africa CDC) Consortium for COVID-19 Vaccine Clinical Trial (CONCVACT).
The program is part of the Africa Joint Continental Strategy for stopping the deadly COVID-19 onslaught that has disrupted human activities. The goal is to prevent severe COVID-19 infections and deaths in African countries, reduce the economic damage caused by the pandemic, and help minimize the general disruption to everyday life.
Quick fact about COVID-19: Although for some individuals, the COVID-19 virus causes only mild illness, it can make other individuals seriously ill. The disease can be very fatal, especially among older individuals, and those with compromised immunities (such as diabetes, high blood pressure, or heart problems) appear to be more susceptible.
South Africa’s leader, Cyril Ramaphosa, said, “Success in developing and providing access to a safe vaccine requires an innovative and collaborative approach, with significant local manufacturing in Africa.
“We need to support the contribution of African scientists and healthcare professionals. We need to act with urgency.”
CONCVACT plans to capture more than ten late-stage vaccine trials at the earliest, via collaborations with global vaccine developers, sponsors, and African businesses that enable clinical studies.
The African group also hopes to secure the safety and efficacy data of promising vaccine candidates for the African population in order to validate their launch after approval.
2021 Budget: FG projects spending plan of N11.86 trillion and deficit of N5.16 trillion
This tops 2020 budgeted expenditure of N10.8 trillion.
The Federal Government is projecting to spend N11.86 trillion for 2021. This was disclosed by the Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed at a virtual presentation of the 2021-2023 Medium Term Expenditure Framework and Fiscal Strategy Paper (MTEF/FSP) held on Friday.
According to the finance minister, the government is planning to spend N11.86 trillion against revenue of N6.98 trillion meaning the government will have to grapple with a fiscal deficit of N5.16 trillion.
“The 2021-2023 MTEF&FSP is the pre-budget statement that provides the framework for the development of the 2021 budget. It is being framed against the backdrop of challenging global macroeconomic environment as well as domestic factors.
“We aim to keep the deficit within the three percent ceiling over the medium term and are therefore working on identifying new revenue sources and or cost of reduction.”
The minister noted that the 2021-2023 draft had been prepared against the backdrop of heightened global economic uncertainty.
Earlier today President Buhari signed the revised 2020 national budget of N10.8 trillion, which was passed by the National Assembly in June. The National Assembly passed a revised budget of N10.8 trillion on the 11th of June after the Federal Executive Council (FEC) approved a revised budget of N10.523trillion in May. 2020 Budget is based on a revised oil benchmark of $25 per barrel as against $57 while crude production was reduced from 2.18 million to 1.94 million barrels per day Budget deficit for 2020 is estimated at N5.365 trillion.
As of March 2020, the FG was running a 52% shortfall in the first quarter of the year with actual revenue collected of N950 trillion compared to budgeted revenue N1.96 trillion.
What this means: Nigeria is facing an unprecedented revenue crisis exacerbated by the Covid-19 pandemic and the crash in oil prices. At N5.16 trillion, Nigeria’s projected budget deficit will be 43% of spending and about 3.6% of GDP if the budget is passed. A budget deficit means the government will have to borrow heavily next year to fund its expenditure programs.
The government received a $3.4 billion funding from the IMF in April and expects another $3.5 billion from the World Bank in August 2020. The government also revealed it has no plans to access the commercial market for foreign debts as it takes advantage of lower interest rates in the domestic market.