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    Jumia Suspends 3 Managment Staff Amidst Internal Fraud Allegations

    Oluwadamilare AkinpeluOluwadamilare Akinpelu
    August 22, 2019
    Jumia Suspends 3 Managment Staff Amidst Internal Fraud Allegations

    Africa’s largest ecommerce operator, Jumia, has suspended 3 of its top management staff over issues of internal fraud. The trio are accused of inflating the order volume of its Nigerian business.

    On Tues, Jumia, Africa's e-commerce "unicorn", revealed:
    • it has suspended staff over an $18m sales fraud
    *is facing "several" lawsuits in New York over its IPO
    • losses continue to widen topping $70m in Q2 alone
    •Shares closed down 17%https://t.co/9MtMFlsWUQ

    — Quartz (@qz) August 22, 2019

    The company discovered some improper sales practices carried out by these personnel, of which 2 are based in Nigeria while the third person is in Dubai. And all three have been suspended pending a review of the situation, although according to The Guardian, they are not expected to return to the company.

    The inflated volume came from improper transactions carried out by Jumia Force (JForce), its network of commissioned agents. This amounted to about 4% of the total sales in Q1 of 2019 and 2% of the sales recorded in Q2 of 2018, and these generated around €16 million ($17.5 million) in gross merchandise volume (GMV).

    Jumia Announces 58% Growth in Revenue in Q1 2019 Despite Fraud Accusation
    Jumia IPO

    This is said to have happened months before its IPO in April 2019, hence Jumia claims the fraudulent orders had no impact on its financial statements. Although it acknowledged that the figure for the Q2 of 2018 has been adjusted to reflect the actual volume of the transactions.

    We’re talking about isolated instances that had only a modest GMV (gross merchandise volume) impact and virtually no impact on our financial statements. We are constantly reviewing and improving our systems and controls to help us avoid such instances in the future.

    Sacha Poignonnec, Co-founder, Co-CEO, Jumia

    What This Means for Jumia

    Soon after its IPO, Citron Research, a stock market analysis company, accused the ecommerce giant of fraud.  It claimed that the startup had fraudulently increased key figures, such as number of users and number of merchants, prior to its listing.

    Following this damning report, the ecommerce startup hit a storm on the stock market, as its stocks crashed below its IPO price of $14.50 to as low as $14.31 over the past few weeks. This is despite its robust debut on the New York Stock Exchange (NYSE) which saw its stock price rise as high as $49.77.

    We were the whistleblowers who called #Jumia a Fraud back in May 2019 (video below).

    Today (August 2019) Jumia CEO acknowledged the company committed Fraud (video: https://t.co/7IDFWZeZtI) but blames Nigerian employees.

    No! Management has to take responsibility!@africatechie https://t.co/zW26qUo4YP

    — Issam Chleuh (@issamchleuh) August 21, 2019

    While the company struggles to stay afloat on the NYSE, this new revelation reinforces the accusations of fraud which Jumia has had to navigate following its listing.

    It does not help that many experts believe a fraud of this magnitude could not have been done without the knowledge of the company’s management.

    For someone who has built a large scale e-commerce business, I can confidently tell you that there is no way that a $10m+ fraud can happen without the complicity or, at the minimum, the tacit consent of management. It’s impossible.

    — Sim Shagaya (@SimShagaya) August 22, 2019

    Jumia has now confirmed that “several class action lawsuits have been filed” against the company and its officers in New York over “alleged misstatements and omissions” in its IPO prospectus. It also noted that the lawsuits “remain in their preliminary stages.”


    If you’d like to get featured on our Entrepreneur Spotlight, click here to share your startup story with us.


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    Oluwadamilare Akinpelu

    Oluwadamilare Akinpelu

    Oluwadamilare Akinpelu is a lover of the Tech World. He is a calm person and also a protean writer.

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