Cheap at the price: Chinese internet retailer Shein’s pop-up shop at Mall of Africa in Johannesburg. (Photo by Per-Anders Pettersson/Getty Images)
Local retail and trade bodies are up in arms over the South African Revenue Service’s (Sars) postponement in implementing a 45% tariff on clothing imported from Chinese retailers Shein and Temu and are calling for the playing field to be levelled.
The revenue service was scheduled to implement the 45% tariff on 1 July, effectively increasing the price of importing garments from China. But Sars says it is still consulting the industry and has not provided a date for when it might go into effect.
The executive director of the National Clothing Retail Federation Michael Lawrence said by not implementing the duty, Sars was actually supporting Shein and Temu.
“They are, technically speaking, continuing to invest in offshore online retail at the expense of the local retail and manufacturing community,” he said.
Consumers pay only 20% duty on items under R500 on Shein and Temu’s online platforms. Sars introduced this concession for low-value goods in 2007 but Lawrence said the market had evolved, with larger quantities being imported, resulting in significant losses for the South African economy.
The duties, he said, were meant to protect South Africa’s manufacturing interests but the lower duty that Sars was charging for small parcels meant that this was not happening.
The revenue service has said it had lost R3.5 billion as a result of lower duties on imported products.
“In terms of government revenue, it should also concern us all that Sars is collecting only 20% instead of 45% in customs revenues, and is not collecting VAT [value-added tax] from sales to customers,” said Alastair Tempest, chief executive of Ecommerce Forum South Africa (EFSA). “At the end of the day, that is a loss to all citizens.”
He noted South African wholesalers, retailers and e-commerce outlets have to pay custom duties of 45% on imported textiles and must still charge the end consumer 15% VAT, which the Chinese retailers are not required to apply to their products.
The profit margins for e-commerce sellers is “paper-thin” because there is very little price elasticity, Tempest added.
He said EFSA wanted to see fair competition, where every company applied the same regulations in terms of consumer and privacy protection.
Although it has been criticised by stakeholders in local industries, Shein remains popular with South African consumers.
On the first day of its recent pop-up event at Johannesburg’s Mall of Africa, shoppers waited in a long queue to see what was on offer, try on clothes, make orders and win vouchers, although it was not possible for them to make on-site purchases.
Fashion designer Rumaanah Sayed, who is not a regular Shein customer, said she was curious about the pop-up and it gave her a better idea of what Shein has to offer.
“From the items I bought [online prior to this], the quality of the items were not so great, but now that I have been in the store, and actually felt other items and the fabric and everything, it was impressive.
“So, I think it depends on what you order online. I think you have to know you can’t just order anything and expect the best quality.”
Sayed was aware of the impending tax and said that it was concerning, especially as the brand becomes more popular.
“If I use my previous order, for example, my customs was extremely little — it was below R500 — and, from other stories I’ve heard, people are paying over R1 000 for customs, which is scary, because Shein is so big and now with the pop-up, people are going to want to buy more, so it’s something to worry about.”
A spokesperson said, given that it was a digital-first company, Shein’s pop-ups “are an opportunity for our consumers to touch and feel our products, as well as to interact and engage directly with Shein’s local brand ambassadors”.
Passer-by Phathutshedzo Mudau, a regular Shein customer, said she was disappointed by the limited options at the pop-up shop. She buys from Shein because she finds its items affordable.
“We won’t go for anything that is very expensive. If the prices increase, we will go to another shop, because we always go for reasonable prices when we buy.”
Another regular buyer, Thea Fautley, said she would continue supporting Shein, even if the tax increase was eventually implemented.
Lawrence said the local industry acknowledged the affordability of products from the Chinese online retailers but wanted an equitable situation from which South African manufacturers could also benefit.
“We all accept that any lesser duty is to the benefit of the consumer. Let’s accept that as a reality and we don’t dispute that.
“But our concern is, are we, as legitimate traders in this country — legal business entities, South African businesses — able to have a level playing field and can we have a situation where whatever we’re doing at the commercial effort is fair to all?”
He said local online retailers were not able to sell their goods as cheaply as their Chinese competitors and remain viable.
The industry was planning to meet Sars to work out solutions.
“[We want] a level playing field that, at the end of the day, is in the consumer’s interest. The level playing field is in the interest of the retail sector because everyone’s competing fairly. It’s in the full interest of the manufacturing sector,” he reiterated.