Temu and Shein under threat in South Africa

E-commerce platforms Temu and Shein were in the spotlight for most of 2024 due to their popularity among South African shoppers, but their dominance could wane this year due to the South African Revenue Service’s (Sars) tax interventions.

Shein had been available locally for some time before Temu launched in the country in January 2024, and early last year, the platforms experienced such a surge in orders from South Africa that its local logistic partner struggled to cope with the volume.

Their popularity disrupted South Africa’s e-commerce market and, to some extent, put a target on their backs. This was largely because they offered lower pricing, particularly for clothing.

Many local retailers accused the companies of exploiting certain tax loopholes to undercut local pricing.

However, the loophole was a Sars concession for low-value imports under R500 to enable a simplified package-clearing progress. The concession was introduced in 2007.

The concession meant that companies like Temu and Shein could charge customers a flat duty of roughly 20% of their order’s value.

This frustrated local clothing retailers, as the concession also applied to textile imports for which local retailers are charged a duty of 45% plus 15% VAT.

Sars came to the party in July 2024 when Commissioner Edward Kieswetter revealed that the import loopholes had resulted in fiscal losses of R3.5 billion.

He promised to clamp down on the unfair advantage e-commerce players like Temu and Shein had over local retailers.

Kieswetter also said Sars needed to modernise its processes as the concession from 2007 was introduced at a time when e-commerce wasn’t a common method of shopping in South Africa.

“It was a couple of people buying from Amazon.com and Alibaba,” he said.

Kieswetter announced planned changes to its import tax rules in August 2024 to better align its practices with the World Customs Organisation (WCO) framework.

These included adding VAT to the flat 20% duty charged on Temu and Shein orders, which it implemented in September 2024.

Sars then planned to reconfigure the 20% duty into the WCO for the first three categories of imports from 1 November:

Category 1 — Correspondence and documents — No commercial value, not subject to duties and taxes, immediate release based on a consolidated declaration.

Category 2 — Low-value consignments below a specified de minimis threshold (R500) for which no duties and taxes are collected and qualify for immediate clearance and release.

Category 3 — Low-value dutiable consignments (simplified goods declaration) — goods above de minimis but below the full declaration value threshold and are dutiable.

Category 4 — High-value consignments (full goods declaration) — Consignments not falling under the three categories described above include consignments containing goods subject to restrictions.

Temu and Shein tax confusion

While the higher import duties on Temu and Shein orders will likely threaten their popularity in South Africa, a MyBroadband analysis has also found that there is much confusion over taxes applied to orders from these companies.

We analysed several orders from Shein and Temu customers placed after 1 November 2024 and found that the duties charged varied significantly, ranging from 11% to 32%.

An effective tax rate of 11% is lower than the 15% VAT that is supposedly levied on all imports regardless of their value. Another order, valued at R1,096, was taxed exactly 15%.

However, several other orders, with values ranging from R404 to R692, were taxed at varying rates. Three of the orders didn’t include clothing, and these were taxed at 21%, 22%, and 26%.

The one order that did include clothing had a value of R536 and the customer paid customs duties of 32%.

The table below summarises the tax details for several Shein and Temu orders made after 1 November 2024.