Early Konga investors’ confidence shaken by 2015 naira crisis

by | February 6, 2018 1:45 am

Experts have hinged the survival struggle of Konga on the economic downturn faced in Nigeria in 2015 which shook its initial investors’ confidence and subsequently led to drastic devaluation of the company’s worth.
Although Zinox Group has refused to disclose the exact amount paid to acquire Konga, news reports suggest that the company was sold for as low as $10 million. Industry watchers say this is very likely as the company had been facing challenges in the Nigerian market.
Konga, one of the first e-commerce companies in Nigeria, came into the market in 2012 with $3.5 million in seed investment, according to its annual reports. Riding on first mover advantage in Nigeria’s e-commerce space, with only one other competitor – Jumia, Konga got a further $17.5 million investment from Kinnevik for a 46 percent equity while Naspers acquired 25.5 percent of Konga for $9.7 million.
This financial record of the company shows that it raised about $27.2 million from its two major investors within a year of operation and was valued at no less than $38 million.
Online reports suggest that Kinnevik and Naspers invested some more money into the company in 2014, as e-commerce started to gain momentum in Nigeria.
However, the Naira crisis in 2015 shook the company, as well as other e-commerce players in Nigeria and Konga’s value was immediately written down by its investor Kinnevik, from about $200m to $35million. This was only a few months after Konga had succeeded in raising $40 million from Naspers in a series C raising and had been valued at about $200million.
Naspers was reported to have regretted this move when in 2016 it admitted that it “recognised impairment losses of $53million relating to Konga”. In the same year it was revealed that Konga had only about 184,000 active customers.
Kinnevik decided to lower the valuation of its participation in Konga down from $48m to $12m, a gross devaluation. This was apparently due to developments relative to Nigeria’s currency and market environment, only 8 months after its series C funding.
“The mistake that Konga made was depending solely on its e-commerce business in Nigeria where there is so much instability. Its competitor, Jumia, was wise enough to augment shortfalls from e-commerce Nigeria with its other operations in the country and from 23 other countries where it operates,” Subomi Sodipo, CEO, CFmobile told BusinessDay.
On the other hand, Jumia had raised 425 million Euros from AXA, Goldman Sachs, Orange and CDC, at a $1billion valuation in 2016. This was the largest VC round ever done in Africa.
According to Bastien Moreau, Former MD for Rocket Internet’s Jumia Group and CEO for Morocco, “the main reason why Jumia managed to close a glorious up-round while Konga got its valuation divided by four, is that Jumia was already present in 23 countries, where it leveraged better performance in markets such as Kenya, Morroco and Ivory Coast at the time and had several other subsidiaries such as Hello food (food delivery service), Lamudi (website for housing), Carmudi (Cars), Everjobs, Jumiapay and others, including Kaymu which was created as a C2C integrated market place but was merged last year.”
Konga has only two other subsidiaries, KOS Express (its logistics arm) and Kongapay (its payment platform).
It is no surprise then that Zinox Group which recently acquired Konga, is thinking of expanding Konga’s operations to other parts of Africa.
“Since its last investments in 2015, Konga did not communicate on any other new cash injection,” Moreau said in a recent article on “why Konga is worth $35m and Jumia is worth $1billion.” This is of course until the announcement of acquisition of the company by Zinox on Friday February 2, 2018.
Recall that BusinessDay reported in December 2017 that Konga.com laid off about 60 percent of its workforce on November 30, 2017; right after the company put a stop to its payment on delivery option.
Shola Adekoya, CEO of Konga at the time said the company was adopting ‘a leaner business model.’
Gideon Ayogu, corporate communications manager, Zinox Group, told BusinessDay that the company ‘fully acquired Konga but had to keep aside 1 percent equity for a minority shareholder.’
Ayogu also disclosed that “Konga.com will remain as an e-commerce company but there are plans to expand to other African capitals. There are no plans for a merger between Konga and Yudala or any other company under Zinox Group.”

Jumoke Akiyode-Lawanson