Author(s): Raghu Gopal
This week, French insurance giant AXA announced an investment of €75 million for an 8 percent stake in Africa Internet Group (AIG), one of Africa's largest e-commerce start-ups. The firm is expected to be the continent's first so-called "unicorn", with the investment valuing the e-commerce start-up at more than $1 billion. AXA joins Millicom, MTN — Africa's largest network operator — and Rocket Internet as AIG shareholders.
AIG was founded in 2012 and currently operates in 26 countries spread over eight different verticals. It has more than 70 companies in its portfolio, including transport provider Easy Taxi, employment firm Everjobs, travel provider Jovago, online retailer Jumia, real estate agency Lamudi and fashion merchant Zando.
Africa is home to the fastest-growing young population, and this is expected to translate into expanded consumer spending. Mobile phones have transformed the way Africans live and work, with mobile Internet providing the essential foundation for economic development by offering financial services to under-banked families and making credit available to small businesses. GSMA Intelligence reports that the online market has been fuelled by the growth of 3G connections and availability of low-cost handsets. Smartphone adoption rates in Africa have doubled to 20 percent of total connections in the past two years, with penetration rates expected to increase to one third of all connections by 2017 and more than half by 2020.
Retailers in Africa are leapfrogging the traditional bricks-and-mortar sales model, jumping directly into e-commerce thanks to a growing young middle class and increases in mobile and Internet penetration. E-commerce spending in Africa is expected to reach $75 billion by 2025 according to a report by McKinsey, following enormous growth in China over the past few years and current surges in e-commerce in India.
Start-ups like AIG have opportunities to innovate as a growing number of young people in Africa go online via mobile. There's plenty of room for more African unicorns if this comes to fruition.