One of Africa’s largest e-commerce platforms, Jumia is currently facing a series of allegations in the United States (U.S). These allegations range from fraud to disclosing false figures of the company’s assets, amid mounting losses which grew by 59.2 percent over the past year.
In what looks like one of the biggest lawsuits the company has ever faced, one or more of its staff allegedly engaged in a fraud worth $17.5 million by inflating the number of orders that took place through the company’s site. Analysts also believe that Jumia adjusted its financial figures to cover up for internal fraud.
Although Jumia claimed the fraudulent activity didn’t affect its figures in the financial statements, the improper order accumulated to $17.5 million in Gross Merchandise Volume (GMV) value between Q4 of 2018 to Q1 and Q2 of 2019.
While names are yet to be revealed, the suspects have been suspended, while the company looks critically into the case.
These brewing allegations have drawn comments from a rival e-commerce platform, Konga.
The founder of Konga, Sim Shagaya reacted to the Jumia scandal. “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 a minimum, the tacit consent of management. It’s impossible,” Nairametrics quoted Shagaya as saying.
Shagaya also went on to state how this grievous act by Jumia was a taint to the e-commerce sector and his business in particular. He recalled that during meetings with investors, Konga is constantly compared with Jumia in terms of how the latter has grown substantially in the last few years compared to Konga. “We know now that this growth was a lie,” Shagaya added.
While it is widely regarded as unethical that a company or its staff should manipulate company records, a common factor that propels such an act is the staff’s desperation to meet specific targets within a limited time frame.
This will not be the first time Jumia is faced with allegations of inflating its numbers. The company, which recently got listed on the New York Stock Exchange (NYSE) was reported to have tendered a different figure between Q4 of 2018 and Q1 of 2019, its presumed date for an Initial Public Offering (IPO).
In order to be listed on the NYSE, Jumia allegedly reported a rise in active consumer from 2.1 million in its October investor presentation to 2.7 million by April, while active merchants moved to 53,000 from 43,000 during the same period. This fraudulent activity drew several criticisms, particularly from a detailed report by Citron Research.