Starting July 1, 2024, South Africa will implement new rules for small online orders entering the country. These changes, announced in early June, will affect clothing items valued under R500 ($27.48), making them subject to the same import duties as more expensive items.
Currently, clothing orders over R500 incur a 45% import duty and a 15% value-added tax (VAT). Orders under R500 are charged about 20% import duty and are exempt from VAT. The new regulations will remove this exemption.
The goal is to streamline the eCommerce tax structure and potentially boost import revenues. However, this change is expected to impact small businesses and consumers, especially those buying inexpensive clothing from international sellers, who will face higher costs.
South African online shoppers are not happy with SARS’ plan. The current exemption, known as the de minimis rule, allows people to buy clothing and other small items at lower prices from platforms like Shein and Temu.
Now, thousands have signed an online petition on Change.org, protesting the new enforcement. Over 17,000 people have expressed concerns about the negative effects on individuals, local couriers, cargo businesses, and the eCommerce sector.
Petitioners acknowledge the need for taxation to fund essential services but argue that the sudden increase is unfair. They say it burdens households already struggling with high local goods prices and living costs. The petition highlights that many South Africans rely on Shein and Temu for affordable clothing.
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; the government does not care about us citizens; they just want to eat up all of our money.” the petition states.
The increased tax aims to benefit local retailers who have raised concerns about foreign eCommerce brands exploiting tax loopholes. Michael J Lawrence, executive director of the National Clothing Retail Federation (NCRF), told Fibre2Fashion that the new regulation addresses difficulties in calculating small parcel duties and closes a loophole that has led to significant revenue and trade implications.
In April, local retailers, through the E-commerce Forum South Africa (EFSA), voiced frustrations over Shein and Temu’s competitive prices and exploitation of import tax loopholes. They complained about foreign businesses’ low prices and large advertising budgets, which local players can’t match. They also noted that these competitors often don’t follow South African laws, giving them unfair advantages.
Shein and Temu have become major players in the global eCommerce market. Temu operates a marketplace offering various products, while Shein follows a direct-to-consumer model, quickly responding to market trends and minimising overproduction.
In 2023, Shein’s sales exceeded $30 billion, and it now operates in over 150 countries. Temu has also seen significant growth, with its app surpassing Amazon in popularity by March 2024. Temu launched in South Africa in early 2024 and quickly became the most popular free smartphone app in the country.
These new rules are part of South Africa’s efforts to level the playing field for local retailers, but they come with significant controversy and potential challenges for consumers and small businesses.
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