A petition against the South Africa Revenue Service’s decision to close a tariff loophole on clothing imported from stores like Shein and Temu has amassed thousands of signatures.
Before November 1, importers were required to pay VAT and a 45 percent tax on clothing priced over R500. For items under R500, however, a “concession” was implemented, where importers paid a fixed rate of 20 percent instead of a tax and without VAT.
Therefore, exporters could avoid the 45 percent levy and VAT by dividing their orders into “small parcels” worth less than R500. This made it possible for companies like Shein and Temu to offer their goods at lower prices, undercutting local merchants and threatening local factories, according to Simon Eppel, director of strategy and research at the Southern African Clothing and Textile Workers Union (SACTWU).
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45% duty and VAT now apply to Temu and Shein’s products under R500
As of November, the 45 percent duty and VAT also apply to imports under R500. In making the announcement, SARS stated that it had taken note of “legitimate concerns” that had been raised over the importation of products, particularly clothing, by importers who had failed to pay VAT and customs charges, leading to unfair competition.
SARS stated that as a result, the duty would be rearranged starting on November 1, and VAT would be applied to certain goods.
South Africa’s Retail-Clothing, Textile, Footwear and Leather Masterplan launched in 2019 was designed to strengthen local factories and increase jobs in the industry.
In addition to the over 60 percent rise in locally supplied clothing, accessories, and footwear, Eppel reports that over 20,000 new employment have been generated.
Measures to reduce customs fraud, which Eppel claims is one of the main issues facing clothing manufacturers, are also included in the Masterplan.
Local factories are undermined when goods are misclassified or under-invoiced to avoid taxes and then sold at deflated prices.
Under the Masterplan, SARS has enhanced inspections and seizure of commodities.
SARS indicated that as a result, the duty would be adjusted from November 1, and VAT would be charged to specific commodities.
The National Clothing Retail Federation’s executive director, Michael Lawrence, stated that while it is challenging to measure illicit activity, billions of rands separate South African imports from Chinese exports.
“I am in favour of the new tariffs,” he remarked.
However, those who depended on inexpensive clothing will no longer be able to buy those items, Zakhele Mthembu, a policy officer with the Free Market Foundation, told GroundUp.
“The government, after being lobbied by local businesses, has the intention of making imports more expensive so that consumers would buy the already expensive clothing sold by South African retailers,” Mthembu said.
Petition to stop the import tariff on Temu and Shein products
A petition on change.org with over 24,000 signatures urged SARS to forego the change.
The petition states that “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.”
For R300, a GroundUp employee purchased a stylish pair of boots from Shein. She claimed that she would not have been willing to purchase them at that price locally because they would have cost her several hundred rands more.
It’s challenging to compare clothing from several merchants because it’s rare to locate the exact same item offered by multiple businesses.
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Comparison of the local price of goods to Temu and Shein
However, as far as we can tell, an orange sundress from Shein costs R132, including the levies. A comparable dress costs more than R200 at a nearby store.
Temu is selling a pair of women’s high-waist ripped jeans for R379.00. On Superbalist, we discovered a comparable product for less money. However, a popular chain’s in-store equivalent costs more than R500.
We were surprised by how quickly the Temu website loads and how many options there are for a product like “men’s jeans.” A well-known local clothing chain’s website was significantly slower and offered fewer alternatives.
Complaints of poor quality services against Temu and Shein
However, there are also a lot of online complaints regarding service and quality. Shopping from Temu is like “playing a lucky dip,” according to an article in The Guardian.
Additionally, it’s usually easy to return items in person to big South African merchants like Mr. Price or Foschini.
Online ordering is simple. Returning items purchased online seems to be more difficult and demands a lot more trust.
Temu’s website outlines a respectable but convoluted return policy; the customer must hope that a procedure that entails packing the item and returning it by courier will result in a reimbursement.
Consumer review website Hello Peter has a lot of complaints from customers who had trouble returning or getting their money back from Temu and Shein.
However, the success of these online exporters demonstrates that a large number of South Africans have faith in their offerings and delivery system.