The local manufacturing industry has suffered major losses and job cuts as Chinese e-commerce retailers Shein and Temu continue to penetrate the South African retail sector. . (David Harisson)
The local manufacturing industry has suffered major losses and job cuts as Chinese e-commerce retailers Shein and Temu continue to penetrate the South African retail sector.
The retailers’ entry into the South African market took off quickly during the online shopping boom that resulted from the Covid-19 pandemic lockdown.
Their presence continues to grow in South Africa, having reached about R7.3 billion in sales, which accounts for 3.6% of the local retail — clothing, textile, footwear and leather (R-CTFL) market — and 37% of the sector’s e-commerce sales, according to the latest Localisation Support Fund report.
The fund was established in 2021 as a nonprofit company and public benefit organisation to accelerate industrialisation in South Africa and remove barriers to competitiveness.
“This rapid growth has come at a notable cost to the local economy. The displacement is estimated to include R960 million in lost local manufacturing sales, 2 818 associated manufacturing jobs that may have materialised and 5 282 unmaterialised retail jobs from 2020 to 2024.”
Shein’s popularity in South Africa since 2020 was driven by its affordable dresses, shoes and accessories. Temu entered the market in 2024, but has a larger offering including home and garden supplies, beauty products and toys. The growth of the two companies has outpaced that of many local retailers.
“[It took] four years to get to just under 4% market share. That’s just over one third of the total e-commerce market in South Africa for fashion over four years,” said Courtney Grant, head of buyer and led value chains at consulting company Benchmarking and Manufacturing Analysts.
“It took traditional brick and mortar international retailers 13 years to get to similar figures. So the change is happening quickly.”
South Africa’s e-commerce sector was at 2.4% in 2015 and reached 9.9% in 2024, which is significantly below the global average of 35.6%, the report notes.
“This indicates structural and logistical challenges, including limited last-mile delivery infrastructure [especially to rural areas] and entrenched consumer habits favouring physical retail.”
E-commerce is expected to reach 15.9% by 2030, mainly attributed to R-CTFL sales and underpinned by easier access to online shopping marketplaces through digitalisation.
The report said in a low-growth scenario, clothing, textile, footwear and leather sales by Shein and Temu are projected to increase to R9.7 billion from R7.3 billion, which could see the local manufacturing industry cut up to 11 000 jobs. In a high-growth scenario, sales could skyrocket to R22.6 billion, leaving 35 000 local factory jobs on the line.
Last year, the South African Revenue Service imposed a higher tax on Shein and Temu packages after it discovered a loophole that enabled customers to buy their products at cheaper rates. The aim was to level the playing field by ensuring that retailers, both local and international, were paying the same fee.
Industry experts say that while hiking the tax was a good first move, implementing regulatory policies is crucial to ensuring the South African retail sector is more competitive. One of these methods is to scale up localisation.
“I think there is more we can learn to really ramp up localisation, not so that it becomes a kumbaya decision, but because it makes business sense, and we need to figure out the right incentive policies for that, “ said Grant.
“We’ve closed the loophole in November, but the work is still to be done. We’re not quite there yet in creating that level playing field. But once that playing field is set, it doesn’t mean that Shein and Temu are no longer competitive.”
“In fact, there are some fantastic lessons from these two retailers, particularly around their supply chain strategy, which is underpinned by speed, high levels of digitisation, inventory levels and cost management,” she added.
Pamela Mondliwa, the head of research and information at the Industrial Development Corporation, said losses are inevitable if companies are not able to keep up.
“It’s not always going to be the case that a disruption comes and there is no loss whatsoever, which is why the big focus should always be on how we can leverage the disruption to stay in the game and to thrive in the game going forward,” she said.
Possible measures by the government and retail manufacturers to address the widening gap between local and Chinese e-retailers includes an audit by the National Consumer Commission on online and offshore retailers to ensure that they are aligning with the Consumer Protection Act, industry analysts said.
Irshaad Kathrada, the chief executive of the Localisation Support Fund, said these measures would need to be adapted into the R-CTFL masterplan 2030 which seeks to increase investment, boost exports, create jobs, promote localisation and facilitate transformation.
“There is a lot of unfair competition if you can put it that way, that these guys are intruding on that needs to be closed out, and more consumer education is required around the impact of their spending,” he said.