Merchant Innovation

Investor Has Billion Dollar Eyes On Africa eCommerce

Naspers, the largest African company by market value, is planning to channel its proposed $2.5 billion funding into online retail and video on-demand services across emerging markets in the continent.

“ECommerce is still very much an area of focus for us, and I think that the majority of our investment will actually go into different eCommerce models,” said CEO Bob Van Dijk in an interview with Bloomberg. “We also like connected video.”

Once the company has acquired funding, it plans on using the money to pay debt that it acquired from its $1.2 billion stake in Russian classifieds ad site Avito in October this year, Bloomberg reported.

With an interest in expanding its video on-demand service, the company is also eyeing to take on Netflix as it ventures to find new customer bases in Europe, North America and Australasia.

While the company is planning to reach out to investors in the next two days, its move to raise funding comes at a time when its pay TV service network DSTV, the largest in sub-Saharan Africa, is struggling to keep its head above water. The company had to reportedly cut down on less popular content and raise its prices to keep up with weakening markets across Africa and falling currency value.

The situation might not be so bad for investors after all. After Naspers bought 34 percent of the shares of Tencent Holdings, it saw its income increase by 45 percent to over $611 million from sales of its video business, according to Bloomberg.

“Tencent’s performance was driven by improved advertising and mobile platform monetization,” Naspers said. “The digital terrestrial television business and the South African video entertainment group continue to deliver customer growth and improved financials.” In the last six months, sales from its video entertainment business reportedly increased by 12 percent to $1.6 billion.

However, as the company bets big in the African eCommerce market, it might face challenges on the infrastructure front. Many African countries have a stronger mobile broadband network versus fixed broadband, and this might direct much of Naspers’ monetary resources into developing mobile infrastructure, unless, of course, it gets a handsome subsidy in all of its proposed markets.

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