The Institute of Chartered Entrepreneurs (IOCE) has thrown its weight behind Takealot Group’s call for reforms within the South African e-commerce sector.
The non-profit is a professional development body for entrepreneurs, start-ups and SMEs. It says it stands in firm support of SA’s biggest e-tailer’s stance, calling for government’s regulatory intervention, to create a fair playing field that supports the country’s localisation efforts and safeguards the sustainability of local manufacturing industries, particularly within the clothing and textile sectors.
This, after Takealot in its annual report expressed concerns about the long-term repercussions of the rise of low-cost Chinese fashion and general merchandise online retailers, such as Shein and Temu – which directly compete with local retailers like Superbalist.com and the Foschini Group – on the country’s economic growth.
The online retail giant further stated that regulatory gaps and outdated regulations in SA’s e-commerce sector created an enabling environment for the exploitation of tax loopholes by these global e-commerce players.
In a statement, the IOCE notes the offshore global e-commerce sites that cater to South African consumers threaten the nation’s reindustrialisation and localisation efforts, with thousands of jobs on the line.
Tebogo Khaas, global chief entrepreneur of the IOCE, points out that current developments in the local e-commerce sector pose a significant challenge and require policy intervention, in order to adequately protect the local clothing industry.
“The IOCE calls upon all stakeholders − including consumers, policymakers and businesses − to support measures that ensure fair competition in the e-commerce sector.
“While we sympathise with the economic hardships faced by all South Africans, it is crucial for consumers to understand the deleterious effects of unfair competition from Shein and Temu on the local manufacturing sector. The affordability of products from these platforms should not come at the cost of undermining local industries and the jobs they provide,” says Khaas.
According to its website, the IOCE’s mission is to promote ethical entrepreneurship in SA, by helping local entrepreneurs to build and run businesses that are premised on strong ethical values, which place social responsibility, fairness, honesty and integrity at the core of operations.
Ecommerce Forum South Africa previously told ITWeb it had been inundated with complaints from its members this year, against online retailers Shein and Temu, with claims of “unethical tactics” and competitively low prices.
However, Shein and Temu have denied the allegations.
According to Takealot, this call for fairness is not only about maintaining competitiveness; the goal is to safeguard the integrity of SA’s retail, including small businesses, and ensure sustainable growth for all.
“Without reform, potential new international investment could be deterred by the risk of an unstable and unbalanced market. Importantly, beyond the regulatory environment, these businesses selling into our country do not invest in physical infrastructure locally, nor do they employ locally – a net loss to South Africa. We believe it is crucial to quantify the significant current impact of offshore e-commerce on the South African economy, particularly in the manufacturing sector,” says Takealot Group.
Temu, which made its local debut in January, has over 350 million app users across the globe, and was the most downloaded app in the first quarter of 2024. In March alone, the app was downloaded over 41 million times globally, making it more popular than Amazon’s marketplace app, according to research firm Statista.
Shein has grown into a global e-commerce giant, with sales estimated to exceed $30 billion for the period January to December 2023, according to Reuters. It operates in over 150 countries and has moved its headquarters from China to Singapore.
Neither Shein nor Temu responded to ITWeb’s e-mail queries offering them the right to reply.
However, a Shein spokesperson previously told ITWeb it complies with all relevant local tax, trading and customs laws in the countries in which it operates.
“We pay all applicable local taxes, and we have an in-house team overseeing our tax compliance across EMEA, comprised of seasoned international sector experts who manage a robust compliance infrastructure capable of evolving with the developing international tax environment,” noted the spokesperson.
Temu also previously denied deploying anti-competitive tactics in its South African operations, explaining to ITWeb: “We are committed to complying with the laws and regulations of the markets where we operate, and South Africa is no exception. Temu competes fairly in the free market, just like any other advertiser, facing the same competitive forces.”
As part of the South African Revenue Service’s first step in creating a balanced, inclusive and competitive online marketplace in SA, the tax collector has, from 1 July, committed to taxing clothing items manufactured internationally and bought from international e-tailers, such as Temu and Shein, in small quantities (under R500) at the same rate as large quantities (R500 and above). An import duty of 45% plus VAT will apply to such purchases.
Khaas comments: “The South African Revenue Service’s decision to impose a 45% duty on clothing imports before VAT from 1 July is a step in the right direction. The duties on low-value imports, although still very low, are essential for supporting vulnerable consumers employed within the manufacturing sector.”
The changed import duties have been met with resistance from almost 20 000 South Africans who signed an online petition.
“As citizens and consumers, we recognise the importance of taxation in funding government services and programmes,” notes the petition.
“However, South Africans cannot afford this. We buy from Shein and Temu because we cannot afford clothes from local businesses. The point of Shein and Temu is affordability. SARS can increase the tax so quickly, yet they don’t do anything regarding serious issues in South Africa. Shein and Temu don’t only benefit consumers but local couriers as well. This is not fair on consumers; government does not care about us citizens; they just want to eat up all of our money.”
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