Job loss fears as Jumia shuts down food delivery unit

Jumia Food agent awaits delivery from KFC, May 2020. [David Gichuru, Standard]

E-commerce company Jumia Technologies has said it will shut down its food delivery operations in Kenya and six other African markets by December.

The decision to close the division is aimed at prioritising the growth of its core online retail business, the firm said, amid fears of loss of Kenyan jobs due to the unforeseen closure.

Jumia said the move is in line with its strategy to "optimise" its capital and resource allocation and to continue its path to profitability.

It added that Jumia Food is not suitable for the current operating environment and macroeconomic conditions.

Besides Kenya, the company operates in Nigeria, Uganda, Morocco, Tunisia, Algeria, and Ivory Coast.

"It's a segment that's very difficult across the world, with very challenging economics and big losses. It's also a segment that is extremely competitive across the world and Africa," Chief Executive Francis Dufay was quoted telling Reuters.

The Standard could not immediately establish how many Kenyan employees would be affected by the move.

"The economics are tough in this market because the costs are very high and there is plenty of competition so there is downward pressure on the commissions that we make and upward pressure on marketing costs because everyone is fighting for customers," said Mr Dufay in the interview with Reuters.

Jumia, the first African tech start-up to be listed on the New York Stock Exchange, has announced that some employees working in the food delivery unit will be reassigned to the core e-commerce business.

Kenya's online food delivery market is rapidly expanding, driven by the growing middle class and increasing smartphone penetration.

Revenue in Kenya is projected to reach $374.90 million (Sh57.5 billion) in 2023, according to estimates.

This is expected to show an annual growth rate of 16.37 per cent.

Online food delivery platforms operating in Kenya include Jumia Food, Bolt Food, Uber Eats, and Glovo.