What Really Happened with the Jumia Internal Fraud?

Yes, this has been a question on the minds of several Nigerians. How could the largest e-commerce company in Africa suffer internal fraud amounting to $17.5 million?

On the 21st of August, Jumia Technologies announced its financial results for the quarter that ended in June 30, 2019. It was revealed at this Q2 2019 report that the company suffered some internal fraud relating to its sales and orders.

It disclosed that it recently uncovered instances of improper orders placed and subsequently cancelled on its marketplace platform wrongly inflating its order volume. The implication of this is the cancelled orders were not recorded as cancelled. Jumia says it is as a result of internal collusion involving members of its JForce (independent sales agents) with some sellers and employees inflating order volumes to earn more commission.

Speaking on this, Jumia Nigeria CEO Juliet Anammah said, “We received information alleging that some of our independent sales consultants, members of our JForce program in Nigeria, may have engaged in improper sales practices… We have terminated the employees and JForce agents involved, removed the sellers implicated and implemented measures designed to prevent similar instances in the future.”

Cumulatively, the improper orders generated around $17.5 million in Gross Merchandise Volume (GMV) value between the last quarter of 2018 and the first two quarters of 2019, the report shows. In case you were wondering, the GMV is the metric used by e-commerce companies to indicate the total value of merchandise sold throughout the site.

As a result of this fraud, JUMIA stock fell as much as 17.4% during trading on 21 August, 2019.

The first case raised involving the JForce sales team who were allegedly involved in fraudulent sales activities such ss bribing JUMIA employees for positive marketing accounts for 1% of JUMIA’s GMV during 2018 and the first quarter of 2019 he,

Next is the case revolving around orders cancelled before delivery. This particular fraudulent activity amounted to 2% of the company’s GMV in 2018, and 4% of GMV in the first quarter of 2019. JUMIA similarly reported that the “employees” involved have been suspended.

So, basically, when you evaluate the financials and the company’s statement on the fraudulent activities, it is obvious that the JUMIA executives are trying to wash their hands of the fraud, by implying that they had zero idea that such a crime was being committed.

Even if this is the case, shouldn’t these executives be held accountable for incompetence, seeing as it happened under their watch? One can almost say that, considering the huge sum of approximately $18 million involved, the response of JUMIA is lackadaisical. Imagine, till now, no one has been arrested, possibly proving that the employees are not the only ones to be held responsible. The company even when on to say that, “These transactions had no impact on our financial statements.”

Unbelievable!