Jumia Troubled By Employee’s Embezzlement Scheme In Kenya
Africa’s top e-tailer Jumia has revealed that one of the employees at its Kenyan division embezzled approximately USD 150 K by manipulating vendor payment records, shedding light on the ongoing battle to plug vulnerabilities of the platform.
According to Jumia, the fraudulent activity was uncovered last year, a company filing stated, “In September 2022, we discovered that an employee in Kenya manipulated certain vendor payment entries and misappropriated payments in 2021 and 2022.”
Jumia’s e-commerce platform enables vendors to list their goods, while buyers can order and pay before or after delivery. The company acknowledges that the sheer number of participants on the platform and the fragmented nature of its business make it challenging to anticipate, detect, and address fraudulent activities effectively.
Although the financial impact of this particular incident was deemed immaterial (less than USD 150 K), Jumia emphasized that any illicit or collusive behaviour by its employees could significantly harm the company’s business, financial position, operational outcomes, and prospects, in addition to exposing it to liability or negative publicity.
Jumia Technologies AG, the parent company overseeing Jumia Kenya, has listed the failure to effectively combat fraud and fictitious transactions conducted on its platform as critical risks that could jeopardize its operations, Business Daily reports.
In a previous case nearly four years ago, the company had disclosed it uncovered instances of internal fraud in the form of improper orders placed and subsequently cancelled on its marketplace platform wrongly inflating its order volume. Some of the improper sales practices, the company said, were carried out by its own personnel in “Jumia Force,” its network of commissioned agents. Cumulatively, the improper orders generated around USD 17.5 M in gross merchandise value between the last quarter of 2018 and the first two quarters of 2019.
For Jumia, losses stemming from fraud are particularly detrimental as the company has yet to achieve profitability. Operating across 11 African countries, the pan-African platform recorded a loss of USD 238.3 M last year, with Kenya contributing KES 12.3 B (~USD 86.9 M) to the overall figure.
Fraud has become an increasing concern for businesses in Kenya, as technological advancements have presented both opportunities and challenges. Safaricom recently revealed that it terminated the employment of 33 individuals in the year ending March 2023 due to fraud-related offences, marking an increase from the 24 dismissals in the previous year. Similarly, a tech worker at a notable Kenyan IT firm consulting for Kenyan banks and telcos was implicated in an alleged case of theft orchestrated via company systems.
In its annual report, I&M Group’s Rwanda unit disclosed a loss of USD 10.3 M resulting from fraudulent customer withdrawals within a three-month period. Consequently, investigations have been initiated to recover the funds. Additionally, Absa Bank Kenya also experienced significant losses due to fraud, amounting to KES 107.7 M (~USD 761 K) last year, though it managed to recover KES 59.1 M (~USD 417 K) and successfully prevented fraud amounting to KES 428.5 M (~USD 3 M) during the same period.
“Fraud remains a major challenge for the financial sector in Kenya. In line with the trends observed in 2021, fraud continues to evolve rapidly and match the increased preference by customers for digital propositions,” noted Absa.
