E-commerce firm Jumia Kenya has disclosed that its employee stole about $150,000 (Sh21.2 million) by manipulating vendor payment records, pointing to the risk of fraud facing the platform.
The firm, which has been posting losses in the Kenyan market, says in the latest disclosures to US regulators that it discovered the fraud in September last year.
“In September 2022, we discovered that an employee in Kenya manipulated certain vendor payment entries and misappropriated payments in 2021 and 2022,” Berlin-based Jumia Technologies AG said in the filing.
Jumia’s e-commerce platform allows vendors to list goods while sellers are able to order and pay before or on delivery.
The firm says it is a challenge to anticipate, detect and address fraudulent activities given the high number of participants on its platform and the fragmentation of the business.
“While the financial impact, in this case, was not material (below $150,000), any such illegal, fraudulent or collusive activities by our employees could have a material adverse effect on our business, financial condition, results of operations and prospects and could subject us to liability or negative publicity.”
Jumia Technologies AG, the trading group under which Jumia Kenya falls, lists failure to deal effectively with any fraud perpetrated and fictitious transactions conducted on its platform as some of the key risks that could harm its business.
Fraud is a growing concern for many companies in Kenya, with technology having come with its own share of challenges as much as it has created opportunities such as managing costs and faster service delivery.
Safaricom, for instance, disclosed that it fired 33 employees in the year ended March 2023 for fraud-related offences, a rise from the 24 dismissed the year before.
I&M Group’s Rwanda unit lost $10.3 million (Sh1.46 billion) to fraudulent customer withdrawals in under three months, triggering investigations in an attempt to recover the amount, according to its annual report.
Absa Bank Kenya also says it lost Sh107.7 million last year to fraud but recovered Sh59.1 million. It also stopped fraud amounting to Sh428.5 million in 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,” said Absa.
For Jumia, losses from fraud are a blow given that it is yet to become profitable. It operates a pan-African platform in 23 countries and posted a $238.3 million loss (Sh33.8 billion) last year, Sh12.3 billion from Kenya alone.
