How Jumia lost millions in cyber fraud, robbery
Jumia Kenya has revealed that it lost at least Sh105 million in the last two years due to consumer cyber fraud and a robbery. Revelations in IPO prospectus point to security challenges faced by e-commerce firms in Africa. The e-commerce firm said this in its filing as it seeks to list shares on the New York Stock Exchange.
E-commerce platform Jumia Kenya has revealed that it lost at least Sh105 million in the last two years due to consumer cyber fraud and a robbery, a disclosure that points to some of the factors that have sunk the firm deeper into the red. The latest incident, which happened late last year, involved a break-in at its warehouse in Kenya that resulted in the loss of merchandise to the tune of Sh50 million.Meanwhile, in 2017 the firm took a Sh55 million hit after a group of consumers fraudulently used electronic payment suppliers to acquire goods.
The e-commerce firm said this in its filing as it seeks to list shares on the New York Stock Exchange.Jumia’s largest shareholder is South Africa-based telco MTN Group (31.28 percent stake). Germany’s Rocket Internet held a 21.74 percent stake as at December last year. The IPO prospectus also disclosed that a further Sh81 million had remained uncollected in 2016 from customers who purchased goods across Kenya owing to the platform’s “insufficient cash reconciliation system” at the time, an issue Jumia says it has since corrected.“The extent of the effect on our cash flows in 2016 was due to our previous use of an insufficient cash reconciliation system, which has now been replaced with an automated one that allows us to monitor transactions in each of our markets on a daily basis,” Jumia said in the filing.“We face the risk of fraud perpetrated directly by our consumers… Consumer fraud may harm seller confidence in the integrity of our marketplace and the certainty of payment.”
The US Securities and Exchange Commission (SEC) filing also shows that Jumia, founded in Lagos in 2012, has lost hundreds of millions of shillings, growing every year when compared to revenue made.The company was valued at over $1 billion (about Sh100 billion) in 2016. Its filing shows that it had accumulated losses of $192.4 million (about Sh19 billion) as of end of December 2018. The e-commerce platform in its filing has cited political instability, regulatory uncertainty and logistics nightmare in African markets as some of the other risk factors facing the company.Jumia opened shop in Kenya in March 2013, having been founded in Nigeria a year earlier. The Kenyan unit is ranked third in revenue in Africa behind Nigeria and Egypt.