Africa Internet Group (AIG) has secured 225 million euros in funding from investors including U.S. bank Goldman Sachs, South Africa’s MTN and Rocket Internet, the Nigerian e-commerce group said on Thursday.
The investment comes just weeks after the company announced that Axa, the French insurance group, had invested €75m for an 8 per cent stake in the group. This fundraising round includes investment bank Goldman Sachs, as well long-time backers MTN, the South African telecoms group, the German start-up incubator Rocket Internet and values the group at more than €1bn.
Sacha Poignonnec, Africa Internet Group’s co-chief executive, says the new funding reflects the business’s “huge growth potential”, as investors look to profit from the increasing number of African consumers going online.
Revenues for the overall group increased by 282 per cent in 2015, helping the company’s valuation to more than double in little over a year.
Jules Frebault, an executive director at Goldman Sachs, says the bank was attracted by the company’s reach across the continent and “execution capabilities”, gave the business “a leading role in the development of Africa’s online economy”.
Africa Internet Group and Jumia were founded with an investment from Rocket in 2012, and entered a partnership with Swedish telecoms group Millicom the same year.
The group has gone on to create 71 different companies across 26 African countries, including the online delivery service Hellofood, a hotel booking company called Jovago, and the ride-hailing service Easy Taxi.
Jumia, which is the biggest of the group’s businesses, was launched in Nigeria and now operates in Algeria, Cameroon, Egypt, Ghana, Ivory Coast, Kenya, Morocco, Senegal, Tanzania, and Uganda.
The latest investment will primarily be used to improve operations in those markets but the company is also planning to expand into more countries.
Mr Poignonnec singled out the Democratic Republic of Congo as one the company will enter soon, citing the size of the market — around 68m — and the dynamism of its business community.
The group has yet to make a profit but Mr Poignonnec says he “sees the world a bit like Amazon, in the sense that Amazon is not profitable because they see that they should still invest”. He says that they are aiming to be “profitable in the next three years” but could choose to invest further funds to build scale instead.
He added that shareholders were likely to consider an IPO “at some point,” and said the option is “on the table for the future,” but declined to give further details.
Investors see potential in companies that are looking to reach the increasing numbers of African consumers that are expected to go online in the coming years.
McKinsey, the professional services firm, says about a third of the African population has internet access but predicts that this will rise to 50 per cent by 2025, and will include 360m smartphone owners.
Despite the latest fillip for the African internet sector, the continent’s ecommerce market has also seen a number companies and investors scale back their involvement in recent months.
In 2014, Jumia, alongside rival ecommerce companies Konga and Takealot, together raised more than $250m. But Disrupt Africa, a media site that tracks and reports on start-ups on the continent, reported that only $18m was raised by ecommerce groups last year.
Naspers, South Africa’s biggest company and one of the continent’s biggest technology and media groups, has also sold or reduced its stake in a number of ecommerce businesses.
Paul Cook, director of Silvertree Internet Holdings, a South African business incubator that is also a seed investor in the continent’s tech start-ups, says the industry has been affected by the same waning enthusiasm for tech companies’ lofty price tags seen in the US and Europe, as well as problems more specific to Africa.
“Some of the big operators have gone in too hard and too fast with their expansion”, before realising that market sizes in the short term are still smaller than expected, he says.
Mr Cook adds that the combination of short-term concerns with continued belief in Africa’s “very good” long-term prospects has caused the lack of consensus between different companies.
Tunde Kehinde, the entrepreneur who co-founded Jumia but left after less than two years to set up a delivery system called Africa Courier Express, says he expects the group to keep growing. “The bigger they get, the more high-quality brands they bring in . . . it will be very hard to split that kind of business,” he says.
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