Fraud will continue to impact Nigeria’s e-commerce space until security systems and business processes are strengthened.
This is according to industry professionals who have commented in the wake of a legal case involving a University of Lagos post-graduate student Aniekan Charles Ekong.
The accused allegedly defrauded former employer and e-commerce site, Konga, of over N7.5m (approximately US$19,700) and faces a three-count charge of stealing, impersonation and fraud.
Ekong pleaded not guilty to the charges at a Lagos Magistrate Court and has been granted bail until the trial commences on 7 September 2020.
Commenting on the issue, Adeshina Adewumi, co-founder of One Kiosk Africa, which uses AI to disrupt the e-commerce sector, said Nigerian e-commerce sites need to tighten up in terms of technology and business processes in order to plug up porous processes and controls.
Adewumi added that a lack of understanding of how e-commerce works among disgruntled employees is another factor.
“So they focus on the GMV (Gross Merchandise Volume) numbers, expect higher pay and forget that higher GMV does not necessarily always translate to increased revenue before you consider the overhead cost of logistics. At the end of the day, everything lies and falls on the leadership. Effective communication with the team at all levels with them knowing what sanctions wait for defaulters would always serve as a catalyst to discourage others from attempting such fraudulent acts.”
Despite having over two million registered customers, 100,000 merchants and recently rejecting a US$300m valuation by an European investor based on Africa’s e-commerce potential, Konga’s co-CEO, Prince Nnamdi Ekeh, said the company is still operating at a loss of about N100m per month – a reduction from N400m monthly when it got acquired by Zinox in 2018.
In a recent televised interview Ekeh said that they are presently comfortable with the funding from the Group supporting the company – having invested US$120m in the last two years – but may “get to a point where Konga needs to scale beyond measure, when we need to scale across Africa, when Konga becomes a company worth billions of dollars.”
“At that point, we’ll need a lot of funding to run that business so at that point we’ll definitely love to get listed,” Ekeh said. “Of course, the New York Stock Exchange has reached out to us, Nigeria Stock Exchange has reached out to us, London Stock Exchange has reached out to us but we don’t feel the time is right yet. Once we feel the time is right, we can take that step.”
Adewumi said Konga has to put its house in order before pursuing its listing option because he doesn’t believe the alleged theft happened with one transaction.
“If my gut is correct that it did not happen in one transaction, then Konga needs to investigate further and overhaul their system (tech and people-wise) before they go IPO. If not, it would be another case of a disaster waiting to blow like the Jumia fraud case which was managed after hitting the waves of the internet.”