Takealot takes aim at Temu and Shein

Takealot is in talks with governmental and non-governmental institutions in South Africa regarding the regulation of offshore e-commerce in the country, with its sights set on companies like Temu and Shein.

In an interview with 702, Takealot Group CEO Fred Zietsman explained that while third-party sellers on Takealot are forced to pay import duties and taxes for imported products, some “new players” don’t tend to adhere to these regulations.

“If I’m a third-party selling on Takealot’s marketplace, I import my goods from abroad and I pay my import duties, VATs, and tariffs, which puts an inflationary part into my pricing,” he said.

“I think it’s clear if you read the media that some of the new players don’t necessarily follow that.”

“We’re actively speaking to governmental and non-governmental institutions to make clear that revenue leakage to this country’s fiscus is not in anybody’s benefit in the short term,” he added.

He said that, in the long term, these activities undermined industrialisation, import substitution, economic growth, and job creation.

“There has to be an acknowledgement of what offshore online means,” said Zietsman.

“If you’re a business selling into our country but you don’t put up any physical infrastructure [locally] and you don’t employ anyone locally, that’s maybe a net loss to the country as opposed to a gain.”

While he didn’t specifically mention Temu and Shein, Zietsman’s answers came in response to a question about the entrance of Temu, Shein, and Amazon into South Africa.

The quoted comments do not apply to Amazon, as it plans to launch a marketplace in the country with local distribution centres.

It also employs many South African residents at its own physical offices.

In February 2024, National Clothing Retail Federation (NCRF) executive director Michael Lawrence said companies like Temu and Shein exploit tax and import duty loopholes to import their products to South Africa cheaply.

He added that these practices undercut local retailers, threatened local jobs, and limited revenue. Lawrence said the NCRF had flagged these issues with the South African Revenue Service.

“Our concern with offshore online services is that they are not paying the correct duties and VAT. So, our national revenue is implicated, and our local producers are disadvantaged,” he said.

Lawrence explained that their local courier and service provider partners are reporting their duties and taxes to Sars incorrectly.

“There have not been any invoices that show the correct revenue collection from authorities with regard to VAT and tariffs at this point. Either it is being incorrectly declared or miscategorised on the invoice.”

This came after South African retailers urged the government to plug tax loopholes Temu was allegedly exploiting.

The government levies a 45% tax and VAT on imported clothing to protect local manufacturers against cheap exports that could threaten their businesses.

However, according to first-hand tests conducted by the NCRF, the taxes applied to packages can work out to as little as 10% of the item’s value.

Critics argue that avoiding this tariff and the VAT applied allows Shein and Temu to offer their products at significantly lower prices than local competitors.

Temu dismissed the allegations in a statement, saying it is committed to adhering to local laws and regulations.

It explained that it doesn’t list duties and taxes on the prices it displays in its South African store, and that these are only imposed by local authorities when the parcels arrive.

“In our commitment to providing the best service to our customers and adhering to local customs laws, Temu collaborates with a reputable logistics company with extensive experience in e-commerce packaging,” Temu stated.

“The logistics company acts as our customers’ agent with the local customs and tax authorities to clear the package, process, and remit applicable taxes.”