Lessons from Jumia’s frauds travails

E-commerce company Jumia has come under some heavy weather in recent times. The company recently admitted fraud in its sales practices. Jumia said it found cases where improper orders were placed and subsequently cancelled.

These included deals made through its team of sales consultants called J-Force.

However, an expatriate staff of Jumia based in Nigeria has disclosed that the company long knew of the fraud in Nigeria and in other African countries before its IPO. The staff disclosed – on condition of anonymity – that the company had to bolster its figures ahead of its listing on the New York Stock Exchange (NYSE).

Also, Jumia says it has fired the employees and suspended others after investigations of the improper sales practices. The transactions in question amounted to 2% of 2018 gross merchandise volume (GMV).

However, another Nigerian employee of the company averred that Jumia is using the sacked staff as scape-goats to cover up the long on-going fraud which it claimed to have just discovered. The source disclosed that Jumia was desperate to go to market so they connived with J-Force to raise false figures. He added that its Nigerian staff had no idea of the figures being brandished and the celebration on Wall Street when its IPO went live. The source revealed that Jumia’s GMV and other data are controlled and sent from France.

The foregoing has been backed up by another prominent Nigerian entrepreneur, Sim Shagaya. Equally important, Shagaya founded e-commerce rival, Konga.

He slammed the management of Jumia, even as he affirmed that there was no way a fraud of over $10m could have been perpetrated without the ‘tacit consent’ 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.

“What annoys me is that this action of my competitor directly hurts my business. At every meeting with my investors, I was constantly peppered with questions about the ability of my competitor to grow at what seemed at a faster rate than I. We know now that this growth was a lie.

“This is how ecosystems are hurt and credibility of entire environments damaged. They achieved what they wanted. But ultimately they were shortsighted. The market, consumers and investors, always win,” Shagaya disclosed.

The development seems to justify the claims made by Citroen, intelligence equity research company, that the Jumia IPO was based on falsehood and “worthless”.

An e-commerce enthusiast, Michael Iludare, noted that Jumia’s travails show up the unstructured nature of the business. He avers that Jumia’s competitors in Nigeria and South Africa are better structured and will be around for much longer.

“The Jumia business model is a structural nightmare and hardly sustainable. In fact, a closer look at Jumia’s competitors in Nigeria and South Africa shows a stark contrast in structure and business approach.

“Take the example of Konga in Nigeria and Takealot in South Africa. When you see a company that is here to stay especially for the long term, you can tell. Konga had its own issues in the past but the new owners have restructured and turned the business around. Today, the company boasts a clear structure and solid business model. As a result, the huge physical investment made by the new owners is beginning to pay off and the company has won the confidence of the market. The same applies to Takealot which has been in business since 2002 and done very well,” he enthused.