Jumia fires workers amid sales-practices probe
Jumia Technologies AG, the company behind the biggest e-commerce business across Africa, said it has fired employees and suspended others after investigations of improper sales practices.
Jumia said Wednesday it found instances where independent sales agents and sellers worked with employees to profit from what sellers pay to use the online platform and commissions that sales agents earn. Jumia said it fired several employees and sales agents and removed sellers on the platform who were involved in the scheme.
The Berlin-based company, which has operations in countries including Nigeria, Morocco and Kenya, also said it has identified instances where orders were placed and then subsequently canceled. It suspended employees involved in those transactions while a review is continuing.
Co-Chief Executive Sacha Poignonnec described the issues as isolated on a call Wednesday with analysts, saying they had little impact on the company’s merchandise metrics and financial statements. "We are constantly reviewing and improving our system and controls," he said.
A Jumia spokesman declined to disclose how many employees were fired or suspended. Jumia employed about 5,100 full-time employees at the end of December, according to a securities filing.
In connection with its public offering, Jumia disclosed in April that it received information about sales agents in Nigeria potentially having engaged in fraudulent practices. Jumia said Wednesday it had reviewed sales practices across all its markets from 2017 through June 30 of this year in response.
Jumia’s American depositary receipts fell 17% to $12.257 Wednesday as the company also posted wider quarterly losses.
Shares in recent weeks have been trading at their lowest levels since the company completed an April initial public offering. Jumia ADRs, which trade on the New York Stock Exchange, priced at $14.50 each and rocketed in the first few days after the company’s market debut.
Prior to the IPO, Jumia had raised about $770 million in funding from French liquor maker Pernod Ricard SA, South Africa’s MTN Group Inc. and other investors to develop an e-commerce business for African markets. Goldman Sachs Group Inc. bought a stake in the company in 2016, valuing it then at roughly $1.2 billion.
Jumia, founded in 2012, also has faced steep losses in its push for growth, recording about EUR984 million ($1.09 billion) in accumulated losses through June 30.
The company’s independent sales agents, which operate under the JForce banner, were involved in both matters, Jumia said. JForce agents earn commissions by selling goods and services on its platform, and include students, young professionals and small retailers, Jumia said in a securities filing.
Transactions flagged in the investigation of commissions accounted for about 1% of gross merchandise value last year and in the first quarter. The merchandise metric measures the value of orders placed via its platform, including shipping fees and value-added taxes, but before any discounts.
The batch of transactions flagged as "improper orders" accounted for 2% of gross merchandise value last year, about 4% in the first quarter and 0.1% in the second quarter. The company said it had already adjusted the gross merchandise value metric for the second quarter.
"They’re not ready for prime time," said Andrew Left of Citron Research, a short-seller who had accused the company of fraud earlier this year. Mr. Left said he exited his short position earlier this year.
Mr. Poignonnec has previously said Jumia is a "very transparent company." A spokesman didn’t respond to Mr. Left’s comments Wednesday.
Jumia’s most-recent travails underscore the difficulty of operating in one of the most underdeveloped, and yet most promising, retail markets in the world.
The African continent offers businesses the world’s fastest-growing population, a number of swiftly expanding economies and a growing middle class. But faced with poor internet connections, horrendous traffic that upends even the best-planned logistics and tight bank lending for vendors and consumers, Jumia has had to build from scratch much of its economic infrastructure, including its own payment platform, JumiaPay.
Those expenditures are reflected in Jumia’s widening losses, which illustrate just how elusive the African middle class has proved for retailers of all kinds.
Jumia said Wednesday its second-quarter operating loss broadened to EUR66.7 million from EUR41.9 million a year earlier. Revenue rose 58% to EUR39.2 million.
The company reported 4.8 million active consumers at the end of June, up from 3.2 million last year.
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