South Africa: End of tax loophole for Shein and Temu starting to have impact, say local retailers
South Africa's closure of a tax loophole that benefited global discount e-commerce retailers Shein and Temu is starting to show positive signs as some consumers reject the higher prices, the CEOs of local fashion retailers Mr Price and TFG said.
Last November, South Africa's tax authority ended the practice known as "de minimis", which allowed companies to drop-ship packages valued at less than R500 rand from suppliers in China to consumers in South Africa, paying a flat rate of 20% in lieu of customs duties, and no VAT of 15%.
Other markets including the United States, Britain and the European Union are also closing or planning to close loopholes that have given low-cost online platforms like Shein and Temu, owned by PDD Holdings', pricing advantages.
"There's nothing punitive about them, it's just levelling the playing field so that everybody trading in South Africa and importing products pays exactly the same duties," TFG CEO Anthony Thunström told Reuters in an interview after the company's earnings release.
Both Thunström and Mr Price CEO Mark Blair said it was difficult to get official data to quantify the exact impact on the fast-fashion giants.
"But our understanding is that the closure of that loophole has significantly slowed down some of the international pure play online into South Africa," Thunström said.
Local brick-and-mortar fashion and e-commerce retailers had urged South African regulators to impose a 45% import duty on all clothing imports, no matter the price, to level the playing field.
"One thing all of us have seen on Shein is the social media outrage that's now taken place because of higher prices, so it does make us feel comfortable that the new legislation has been applied correctly," Blair told investors during an earnings presentation.
"I think it's still a bit erratic, not across the board and if I look at our own e-commerce sales, it grew slightly ahead of our store sales, so there must be some positive impact," he added.
Mr Price and TFG are also investing in technology and enhancing product ranges as they bid to gain market share.
Mr Price also added that it expects to invest R1.6bn this financial year ending March 2026 in about 200 new stores, supply chain, store revamps and technology, while TFG said it plans to open over 100 new stores.
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