However, it is Konga’s apparent failure to take flight that has been dubbed “a cautionary tale” by Quartz Africa for Africa-focused investors who might be naive to the tough realities of starting up on the continent. Two months ago, Konga retrenched just shy of 60percent of its workforce, and now, with Naspers and the Swedish investment company Kinnevik selling out to the Nigerian tech firm Zinox, it stands to reason that the online shopping company's struggles are very real.
Prior to this deal being announced, Zinox was known for its data centre management and computer manufacturing and distribution businesses. The sale - which has taken many industry observers by surprise - sees Zinox assume control of Konga’s online mall, which is used by more than 10000 merchants; Konga’s delivery and logistics subsidiary KOS-Express; and KongaPay, a mobile money platform with more than 100000 subscribers.
Some industry insiders are convinced that Zinox is poised to pounce on other acquisition targets in Nigeria’s e-commerce space, such as online retailer Yudala.
As details regarding the size of the Konga deal remain undisclosed, speculation that the company was sold for a pittance abounds. It’s widely held that Naspers and Kinnevik are both unlikely to have profited from the sale of their stakes in Konga, despite contributing significantly to the $75million-odd (R897m) worth of investment that the firm raised since breaking onto the scene in 2012.
Meanwhile, Konga’s biggest rival, the Rocket Internet-backed Jumia, continues to lay claim to being Nigeria’s largest e-commerce company. And while the firm goes to great lengths to project an image of steady confidence and incomparable industry dominance, it’s safe to say it has not been immune to the gruelling hardships associated with attempts to convert Nigeria’s massive populace into active online spenders.
In a recent African Tech Roundup podcast, I asked Jumia co-founder and former managing director Tunde Kehinde to comment on the hyper-bullish "African e-commerce will explode" narrative that he and others in key markets such as Nigeria, South Africa and Kenya promoted vigorously some four to five years ago.
After admitting that his thinking around the short- to medium-term growth potential of e-commerce had evolved over the years, he told me that he still considers Jumia’s journey from zero to pushing close to half a billion dollars in gross merchandise value and employing thousands of employees across the continent - all in less than six years - a big win for the continent.
A fair point. However, there’s the small matter of the jury being out on whether Jumia will ever deliver a decent return on investment on the $767.7m that has been ploughed into the firm since 2012.
Kehinde reckons that perhaps the most underrated realism of taking on e-commerce in Nigeria is that alongside the hard work of delivering on industry-leading online user experiences, big e-commerce plays like Konga, Jumia and even MallforAfrica have had to invest heavily in constructing key supporting infrastructure.
They’ve had to build everything from payments, logistics, customer service and marketing infrastructure themselves, and often from scratch.
Kehinde maintains that the operational scope for online shopping platforms in most of Africa is totally incomparable to that of the developed world. He cautions founders and investors against the surface reading of enticing African digital adoption statistics typically published in countless reports that fail to account for the hidden complexities of tackling e-commerce on the continent.
In grappling with the unique grassroots dynamics of the Nigerian online market, Kehinde has helped usher in e-commerce industry innovations such as pay-on-delivery, and in 2013 his experience inspired him to establish another logistics start-up, Africa Courier Express with his co-founder, Ercin Eksin.
In 2016, Kehinde and Eksin once again leveraged their deep insights into Nigeria’s e-commerce market and teamed up to launch Lidya, a branchless internet bank that aims to ease Nigeria’s estimated $30bn small business credit gap. Lidya has so far raised $1.3m of investment. And while its founders are careful not to spin unsustainable growth narratives, they are unapologetic for having audacious ambitions.
Kehinde makes it clear to anyone keen on helping Lidya deliver on their mission that they need to be willing to put some serious skin into the game and be psyched up for a long and bumpy ride. Here’s to hoping that Shola Adekoya - who’s reportedly keeping his chief executive gig at Konga under the company’s new ownership - has given the folks at Zinox a similar heads-up.
Andile Masuku is a broadcaster and entrepreneur based in Johannesburg. He is the executive producer at AfricanTechRoundup.com. Email Andile on [email protected], or follow him on Twitter @MasukuAndile and African Tech Roundup @africanroundup.
The views expressed in this article are not necessarily those of the Independent Group
- BUSINESS REPORT