- E-commerce giant faces legal threats
Jumia Technologies AG, Africa’s biggest e-commerce operator, has sacked three top management staff after discovering inflated sales figures in its Nigerian business, a source at the company said.
Although Jumia claimed that the staff were suspended pending the review of the “improper sales practices,” the source insisted they were not expected to return to the company.
Two of the staff were based in Nigeria while the third person was based in Dubai.
The inflated figures came from improper transactions carried by some JForce staff in Nigeria that amounted to as much as 4% of the sales in Q1 of 2019 and 2% of the sales recorded in Q2 of 2018 – months before its IPO in April 2019.
JForce is a decentralised sales force with dozens of thousands of agents which allows Jumia to physically interact with consumers.
Jumia claimed the fraudulent figures had no impact on its financial statements, although it acknowledged it had to adjust its gross merchandise value for Q2 2018 and that JForce, which it described as “very excellent” requires “constant improvements”.
“We’re talking about isolated instances that had only a modest GMV (gross merchandise volume) impact and virtually no impact on our financial statements,” Jumia’s co-founder and a co-chief executive officer Sacha Poignonnec said on Wednesday.
“We are constantly reviewing and improving our systems and controls to help us avoid such instances in the future.”
The acknowledgement of the dubious figures by Jumia on Wednesday reinforced Citron’s claim that Jumia is “an obvious fraud” in May.
Jumia debuted on the New York Stock Exchange on April 12. Its share price surged and peaked at $46.99. But Citron’s claim sent the price crashing in May to $12.73, which is lower than the $14.50 listing price. Its share price closed at $12.27 on August 21.
Describing Jumia as “this Nigerian Company” – although Jumia is not a Nigerian company – Citron claimed Jumia’s equity was worthless.
“Jumia is the worst abuse of the IPO system since the Chinese RTO fraud boom almost a decade ago,” it claimed in a report.
The e-commerce firm pushed back on those claims and insisted that it was transparent in its dealings.
Poignonnec doubled down on that point on Wednesday during the Results Conference Call for the Second Quarter of 2019. He said the discovery of improper sales practices were declared in the company’s prospectus.
Jumia is, however, facing at least a class action in New York. According to the securities class-action lawsuit filed by Rosen Law Firm, Jumia, throughout the class period, made false and/or misleading statements about some aspects of its operations.
Poignonnec told investors that almost five million consumers patronised Jumia during the last 12 months, with over 80,000 sellers involved. He also said 90% of the items sold were on Marketplace, generating more than a €1 billion of GMV over the same period.
Jumia Logistics handled 13 million packages and 54% of the transactions were processed with JumiaPay in its two largest markets during Q4 of 2018. Those two markets – Nigeria and Egypt – represent 50% of its businesses.