Tech and consumer internet giant Naspers will make a substantial cash injection into its e-commerce retailer Takealot as it vows to “do what it takes” to fight competition from bigger rival Amazon.
There has been much anticipation regarding Amazon’s entry into South Africa and its threat to local e-commerce platforms, especially Takealot.com, the biggest e-commerce marketplace in the country, which has more than 10,000 small to medium-sized businesses using its platform to sell their products.
Naspers and Prosus group CFO Basil Sgourdos told reporters at the release of the companies’ results this week that “we will take the fight to them because we have things to fight with. We have a fantastic business, and we will invest what it takes to continue to build the business and deliver value — and to differentiate our proposition.”
He did not reveal the planned capital injection into Takealot.
Prosus is a Naspers-owned technology investment group with assets across the world, including Europe, India and China.
Interim Naspers and Prosus CEO Ervin Tu said the investment will go into every area of Takealot as “we understand that they [Amazon] will try to enter comprehensively, meaning that they will establish a foothold not just on the consumer side but also in the seller community. They need to attract sellers to their platform. We will be ready across multiple fronts. We welcome competition, we are untroubled by it.”
Takealot also houses the fashion online retailer Superbalist and food-delivery service Mr D Foods. It reported trading losses of $2m (about R38m) in the six months to September, from $13m in the previous corresponding period. Revenue came in at $369m, from $383m.
Sgourdos said Takealot is growing despite the economic challenges the country is facing.
Naspers South Africa CEO Phuthi Mahanyele-Dabengwa said the financial support will reinforce their local expertise to take on Amazon. “One of the things we forget is the importance of having local knowledge, and Takealot has got that. We have seen other areas in the world where Amazon has not been able to be successful because of the lack of local knowledge of businesses that are there.”
She said Takealot has expended much effort in growing small and medium businesses, some of which “didn’t even exist before Covid and now have been able to scale beyond Takealot — and are now in retail stores. There is a lot that Takealot has done to support the retail market in South Africa and we continue to focus on ensuring that these are businesses that are there for the long term.”
Takealot recently faced strong criticism of its business practices from the Competition Commission after an investigation into digital services platforms including e-commerce, food delivery, property and car websites, all of which Naspers has investments in.
The commission’s recommendations will require the platform to adjust a number of its business practices, including segregating its retail division from its marketplace operations, preventing its retail services from accessing marketplace seller data and unilaterally stopping marketplace sellers from competing for certain brands.
Mahanyele-Dabengwa said the majority of the businesses within the Naspers group have implemented most of the commission’s recommendations. “In the property businesses we have now put a programme to ensure that small and medium enterprises participate, and they now make up about 30% of the portfolio of the property businesses. At Takealot there is a lot of work being done to make sure we comply, but there are elements that are still under discussion.”
She said the group had not taken a decision on the possibility of taking the commission’s report on review. Takealot has criticised the report, saying it will benefit foreign competitors at the expense of local companies that are in their infancy.
Naspers South Africa’s businesses include Media24, which reported a 9% decline in revenue to $83m from $106m while recording a trading loss of $1m from a profit of $2m.
In March, Naspers closed its start-up investment fund Foundry, which had invested R740m in online businesses including cleaning services, agriculture, financial services and insurance. It also exited its investment in the student learning platform Student Hub, said Mahanyele-Dabengwa.
She said the closure of Foundry was undertaken to streamline the business, not because there are no longer opportunities in South Africa. “This is not an indication of our lack of interest in South Africa. There are a number of really exciting opportunities. We are very keen and very focused on ensuring that we grow businesses we already invested in.”
Naspers said 60% of its South African portfolio will reach monthly breakeven in the next 24 to 36 months.
