South Africa’s battle with Temu and Shein

South African e-commerce players are preparing to do battle with international importers like clothing retailer Shein and marketplace platform Temu.

Temu and Shein also face a potential crackdown in South Africa following allegations that they exploited loopholes to avoid paying the full customs duties on imports from China.

Trade, industry, and competition minister Ebrahim Patel recently told textile industry workers that the government wanted to confront online retail platforms using tariff loopholes that undermine locally-produced goods.

The minister said Temu and Shein’s dominance was one of the local textile industry’s biggest import-related challenges.

Allegations that Shein was paying less tax than it should be are not new.

Patel’s department already said in 2023 that it was investigating whether Shein was skirting import taxes.

Trade unions representing South African textile workers alleged that the company was using smaller packaging to pay 10–20% on import tariffs compared to standard tariff charges of 40–45%.

Based on the import fees MyBroadband had seen on several Shein orders at the time, the tariff was usually close to 10% of the total value of the order, including shipping and delivery costs.

Our calculations showed that even if this were increased to the 40–50% the trade unions wanted, Shein’s prices would still be well below those of comparable products from its rivals.

However, Shein recently told MyBroadband that these allegations come from a misunderstanding about how it operates.

Ebrahim Patel, minister of Trade, Industry, and Competition

“Prices displayed on the Shein website include applicable taxes,” a Shein spokesperson said.

“We work with our local agents to ensure that items are declared according to the appropriate World Customs Organization Harmonized System (WCO HS) codes, and pay customs duties accordingly, which for imported clothes can range from 30% to 45%.”

Shein said its orders do not benefit from any favourable tax treatment compared to other offline or online retailers.

The online clothing retailer said another common misconception was that it could only offer such low prices by dodging local import taxes.

“Contrary to some common misperceptions, we keep prices affordable through our technology-based on-demand business model and flexible supply chain,” the company told MyBroadband.

“This reduces inefficiency, helps us to lower wastage of material, as well as reduce our unsold inventory. We pass this cost advantage to our customers, and this is what has driven our success.”

Shein’s success in South Africa has put pressure on local retailers.

Besides offering extremely aggressive prices, Shein is also spending big money on marketing in South Africa, which will allow it to outgrow its local rivals.

Takealot-owned Superbalist previously told MyBroadband that it welcomed the competition.

“We’ll never shy away from going toe to toe with international competitors,” Superbalist said.

“We’re proud of our quality, and we believe that our products and service offerings are world-class,” the company said.

“We believe competition is pro-consumer, and we are privileged to have consumers who choose to shop with us.”

Frederik Zietsman, Takealot Group CEO

Online clothing retailer Zando responded to the threat by launching its own clothing import service in South Africa called Zando Global.

Zando partnered with Buffalo International Logistics, one of the same companies Shein uses, as a logistics provider to handle international shipping and customs clearance in South Africa.

Temu has also turned up the heat for local e-commerce platform providers in South Africa.

Its extremely aggressive pricing, combined with customer feedback and spot tests by industry bodies, have also led to allegations that it is skirting local taxes.

South Africa’s biggest e-commerce platform, Takealot, recently said it was in talks regarding regulating offshore e-commerce.

Takealot Group CEO Frederik Zietsman said in an interview in late April that some new players weren’t adhering to tax regulations, while sellers on Takealot are forced to pay import duties.

While he didn’t name Temu and Shein directly, his answer was in response to a question about their entry into the South African market.

“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,” Zietsman said.

Temu denied allegations that it was dodging tax in South Africa.

“Temu reiterates that it complies with all relevant legislation and regulations and does not evade taxes,” a spokesperson told MyBroadband.