Business organisation shares Takealot’s concerns about Temu and Shein

The Institute of Registered Entrepreneurs (IOCE) has backed Takealot Group’s call for reforms in the South African e-commerce sector.

The non-profit organisation is a professional development body for entrepreneurs, start-ups and SMEs. It says it strongly supports the position of South Africa’s largest online retailer, calling on the government to intervene in regulation to create a level playing field that supports the country’s efforts to localise and protects the sustainability of local manufacturing industries, particularly in the apparel and textile sector.

This comes after Takealot in its annual report raised concerns about the long-term repercussions of the rise of low-cost Chinese clothing and consumer goods retailers such as Shein and Temu – which directly compete with local retailers such as Superbalist.com and Foschini Group – on the country’s economic growth.

The online retail giant further stated that legal loopholes and outdated regulations in the e-commerce sector in South Africa have created a favourable environment for global e-commerce players to exploit tax loopholes.

In a statement, the IOCE notes that foreign global e-commerce sites that cater to South African consumers are threatening the country’s reindustrialisation and localisation efforts, with thousands of jobs at stake.

Tebogo Khaas, Global Head of Entrepreneurs at IOCE, points out that the current changes in the local e-commerce sector pose a serious challenge and require policy intervention to ensure adequate protection for the local apparel industry.

“IOCE calls on all stakeholders, including consumers, policymakers and businesses, to support measures to ensure fair competition in the e-commerce sector.

“While we sympathize with the economic hardships faced by all South Africans, it is crucial that consumers understand the harmful effects of unfair competition from Shein and Temu on the local manufacturing sector. Affordability of products from these platforms should not come at the cost of undermining local industries and the jobs they provide,” says Khaas.

As stated on its website, IOCE’s mission is to promote ethical entrepreneurship in South Africa by helping local entrepreneurs establish and run businesses based on strong ethical values ​​that place social responsibility, honesty, reliability and integrity at the heart of their business.

Ecommerce Forum South Africa previously told ITWeb that members had been flooded with complaints this year about online retailers Shein and Temu, who said they used “unethical tactics” and had competitively low prices.

However, Shein and Temu have denied these allegations.

According to Takealot, this call for fairness is not just about staying competitive; it is about protecting the integrity of South Africa’s retail sector, including small businesses, and ensuring sustainable growth for all.

“Without reform, potential new international investment could be discouraged by the risk of an unstable and unbalanced market. Importantly, beyond the regulatory environment, companies selling into our country are not investing in local physical infrastructure or hiring locally – a net loss for South Africa. We believe it is crucial to quantify the significant ongoing impact of offshore e-commerce on the South African economy, particularly in the manufacturing sector,” Takealot Group says.

Temu, which debuted locally in January, has more than 350 million app users worldwide and was the most downloaded app in the first quarter of 2024. In March alone, the app was downloaded more than 41 million times worldwide, making it more popular than the Amazon Marketplace app, according to research firm Statista.

Shein has become a global e-commerce giant, with sales expected to exceed $30 billion between January and December 2023, according to Reuters. It operates in more than 150 countries and has moved its headquarters from China to Singapore.

Neither Shein nor Temu responded to ITWeb’s emailed inquiries offering them the right to respond.

However, a Shein spokesperson previously told ITWeb that the company complies with all applicable local tax, trade and customs regulations in the countries where it operates.

“We pay all applicable local taxes and have an internal EMEA tax compliance team of experienced international industry experts who manage a robust compliance infrastructure that is able to evolve with the evolving international tax environment,” the spokesperson noted.

It has also previously denied using anti-competitive tactics in its South African operations, explaining to ITWeb: “We are committed to complying with the laws and regulations of the markets in which we operate, and South Africa is no exception. It competes fairly in a free market like any other advertiser, facing the same competitive forces.”

In a first step by the South African Revenue Service in creating a sustainable, inclusive and competitive online marketplace in SA, the taxman has committed to taxing internationally manufactured clothing items purchased from international online retailers such as Temu and Shein in small quantities (under R500) at the same rate as large quantities (R500 and above) from 1 July. Such purchases will be subject to an import duty of 45% plus VAT.

Khaas comments: “The decision by the South African Revenue Service to impose a 45% duty on pre-VAT clothing imports from 1 July is a step in the right direction. Duties on low-value imports, while still very low, are essential to supporting vulnerable consumers employed in the manufacturing sector.”

The change in tariffs sparked opposition from nearly 20,000 South Africans who signed an online petition.

“As citizens and consumers, we recognize the importance of taxes in financing government services and programs,” the petition notes.

“But South Africans can’t afford that. We buy from Shein and Temu because we can’t afford local clothing. The whole point of Shein and Temu is affordability. SARS can raise taxes so quickly and yet they do nothing about the serious problems in South Africa. Shein and Temu not only benefit the consumer but also the local couriers. It’s not fair to the consumer; the government doesn’t care about us, the citizens; they just want to take all our money.”