Jumia battles with fraud amidst plans to separate its businesses


Jumia has been facing some issues from concurrent losses, accusations of fraud, to share price going down on the NTSE. The company was even under investigations by law firms for allegedly misrepresenting data presented to investors for its IPO listing. However, the company just recently uncovered improper sales practices involving its J Force agents. These J Force agents are independent sales consultants that served as a bridge between the company and its customers in Nigeria.

The fraud case investigation uncovered the presence of dubious orders which was placed and then subsequently canceled involving the seller, J Force agents and Jumia employees. This resulted in J Force agents getting more commissions that they were due from sales that didn’t happen.

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These improper sales accounted for about $17.5m in gross merchandise volume (GMV) value between 4Q19 – 2Q19. In other words, these transactions accounted for 2% of the GMV for 2018 and 4% of the first quarter of 2019. The parties involved have had their appointments terminated and the company sales practice has been reviewed to prevent such from happening in the future.

Following the recent announcement of its earnings for the second quarter of 2019, the Chief executive Sacha Poignonnec and CFO Antoine Maillet Mezeray highlighted the need to diversify Jumia’s revenue sources. As per its second-quarter revenue report, Jumia’s revenue grew to $43.7 million QoQ and it’s operating loss widened to $70 million YoY (racking up to over $1 billion in total).

In the midst of the ongoing financial rumpus, the company is hoping to open up an additional revenue stream using Jumia Pay as an independent financial service. Jumia Pay was developed to process digital payments on Jumia’s e-commerce platform. Going forward, Jumia plans on making JumiaPay available to other companies besides itself especially in Nigeria and Egypt where it has a stronger presence. Although it operates in 14 African countries, it is only currently present in six countries including Ghana, Kenya, Morocco and Ivory Coast.

Furthermore, bringing out Jumia Pay as a service on its own will take it into an already competitive fintech market. There is currently a fintech startup boom in Africa as they account for 40% of total funding in the continent in recent times. It will be interesting to see how Jumia Pay will leverage the pool of 4.8 million active users and 18, 000 merchants on Jumia to propel it into the fintech space.

Source: Bloomberg | Quartz

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