Starting July 1, 2024, South Africans will face new tax regulations on small-volume and low-value clothing orders from popular online retailers Shein and Temu. The South African Revenue Service (SARS) will impose a 45% import duty plus VAT on all packages from these retailers, ending the previous de minimis rule that allowed packages below R500 to be imported with a 20% duty and no VAT.
This regulatory change has ignited a backlash among South African consumers, who have long relied on Shein and Temu for affordable clothing. A petition titled “Petition for SARS not to increase tax on Temu and Shein orders” has gathered over 15,000 signatures, reflecting widespread concern. The petition argues, “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.”
Despite these objections, Michael Lawrence, executive director of the National Clothing Retail Federation, has dismissed the backlash as based on a weak argument. In a recent Business Day TV interview, Lawrence stated that the affected consumers are primarily middle-class individuals who can afford online credit card purchases. He emphasized the broader implications for the local clothing industry, highlighting that the new taxes aim to protect local manufacturers who struggle to compete with the low pricing models of Temu and Shein.
Lawrence acknowledged the financial stress faced by all segments of the population over the past decade, but urged consumers to consider the bigger picture. He asserted that the taxes would ultimately benefit more vulnerable consumers employed in the local manufacturing sector.
The new duties are part of the government’s strategy to bolster the local clothing industry. Lawrence explained that the high prices of South African clothing brands result from intense competition within the sector. “You’re probably getting the best value you can,” he said, noting that local brands do not overcharge consumers.
Despite the controversy, Shein remains a dominant force in South Africa’s online clothing market. A recent report by the Marketing Research Foundation found that Shein leads in online clothing purchases, with a 35% market share in women’s clothing, significantly ahead of competitors Mr Price (7%) and Superbalist (3%). In children's clothing, Shein holds a 10% market share, and in men’s clothing, it surpasses Sportscene and others, which each have a 4% share.
Shein’s popularity persists despite allegations of unethical business practices, including accusations of tax evasion, fast fashion production methods, and poor labor conditions. The company has defended itself, citing its technology-driven on-demand business model and a 2022 sustainability report that audits labor practices among its manufacturing partners.
As South Africa implements these new tax regulations, the debate between affordability and local industry protection continues, reflecting the complexities of balancing consumer interests with economic policies.
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