In Summary
  • The firm is active in 14 countries in Africa but Kenya accounts for a significant part of this business.
  • Jumia says in addition to seller fraud and fraudulent transactions with legitimate consumers, sellers are also engaging in fictitious or “phantom” transactions with themselves or collaborators.
  • It noted that although it had implemented various measures to detect and reduce the occurrence of fraudulent activities on its platform, there can be no assurance that such measures will be effective in combating fraudulent transactions.

Fraudsters used electronic cards to acquire goods worth over Sh62 million from Jumia in 2017, giving the online shopping platform a taste of online fraud.

Jumia says in addition to seller fraud and fraudulent transactions with legitimate consumers, sellers are also engaging in fictitious or “phantom” transactions with themselves or collaborators in order to artificially inflate their own ratings on its platform, build their reputation and search results rankings.

“A group of consumers in Kenya fraudulently used electronic payment suppliers to acquire approximately €550,000 (Sh62.3million at current exchange rates) in goods on our marketplace in December 2017. Consumer fraud may harm seller confidence in the integrity of our marketplace and the certainty of payment,” Jumia says in a prospectus where it is seeking to raise Sh10billion by selling shares to international investors.

MORE TROUBLES

The prospectus was filed with the Securities and Exchange Commission in the United States this week by its parent company Jumia Technologies AG. It is a requirement for companies to tell their potential investors all the risks facing them and the mitigating measures they have put in place before being allowed to sell their shares publicly. 

The other headache for the firm is payment on delivery. In Kenya approximately 95 per cent of its consumers pay cash on delivery. But early last year, the firm discovered that nearly Sh81.5milion (€720,000) cash payments done in 2016 remained uncollected, the large majority of which was never subsequently collected.

To add to its troubles, thugs broke into its warehouses here in Kenya late 2018, and stole merchandise with a value of approximately Sh56million (€500,000).

The firm is active in 14 countries in Africa but Kenya accounts for a significant part of this business.

The e-commerce platform, which has incurred losses since inception, also notes that a failure to deal effectively with any fraud perpetrated and fictitious transactions conducted on its platform and other sources of consumer dissatisfaction could harm its business.

“We face risks with respect to fraudulent activities on our platform. Given the countries in which we operate, the number of participants on our platform and the fragmentation of our business, it is a challenge to anticipate, detect and address fraudulent activities,” the firm says.

NO ASSURANCE

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