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Tuesday, Nov 19th

Internal fraud rocks Jumia

Internal fraud rocks Jumia

Established African e-commerce site Jumia has confirmed it recently uncovered evidence of internal fraud within its Nigeria operation.

Jumia believes that members of its network of commissioned agents or 'Jumia Force' were behind erroneous orders that were subsequently cancelled on the platform to inflate order volumes.

These orders are reported to have generated around US$17.5-million in gross merchandise volume (GMV) value (total value of merchandise sold through the site) between the last quarter of 2018 and the first two quarters of 2019.

Nigeria is Jumia's largest market and the company launched its initial public offering (IPO) on the New York Stock Exchange in April, with top shareholders including MTN and Rocket Internet.

The first established Africa-centric e-commerce platform to go public generated quick interest and this helped drive its share price to a peak of $49.77 on NYSE.

However, claims of fraud by a short seller analyst knocked the company's stock value below IPO rate as speculation continues over impending lawsuits and investigations.

Jumia confirmed several class action lawsuits have been filed against it over "alleged misstatements and omissions" in its IPO prospectus, but maintains they are still in their preliminary stages.

Adeshina Adewumi, co-founder of One Kiosk Africa which uses artificial intelligence to disrupt the e-commerce sector, commented: "The internal fraud has a lot to do with, first, the internal control measures in place and, secondly, its reporting. My opinion has always been that the e-commerce model playing out in Nigeria and Africa has been very unsustainable over the years."

Adewumi added that a lot has changed since his company announced a model to play within the space and "we are very happy about the potential it holds for the e-commerce space and growth across Nigeria and Africa."

The unfolding situation comes as Nigeria-based payments firm Interswitch renews plans to go public in London and Lagos later this year with JP Morgan Chase & Co., Citigroup Inc. and Standard Bank Group Ltd. behind the financial technology company.

Insiders speculate the value to be at between US$1.3-billion and US$1.5-billion.

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