BD Insider: Bad news for SA online shoppers?

Jesutofunmi Adedoyin -

 🍔 Quick Bite: South Africa’s e-commerce game is heating up. The South African Revenue Service has announced a new import tax law to level the playing ground for every player in the e-commerce market. How would this new law affect the space moving forward?

 🧠 The Breakdown

The days of getting cheaper deals from online marketplaces like Shein and Temu in South Africa could be coming to an end. The South African Revenue Service (SARS) has announced new tax measures aimed at low-cost e-commerce clothing importers like Shein and Temu, which could lead to higher prices for shoppers

Starting September 1, SARS will impose a 15% VAT rate along with the current 20% customs duty on imports valued under R500 ($27). Previously, online marketplaces and retailers were exempt from paying VAT on goods imported into South Africa that cost less than R500.

Why this new tax rule? South African retailers have accused online marketplaces like Shein and Temu of strategically breaking large orders into smaller parcels to remain under the R500 threshold. Retailers, on the other hand, must pay a 45% import tax plus an additional 15% VAT

Retailers felt this was unfair, as it allowed Shein and Temu to offer lower prices, making it easier for them to attract consumers who naturally gravitate toward cheaper products.

Their concerns aren't without reason. Despite long shipping times, Shein has seen its South African user base grow by 300% in the past year. Meanwhile, Temu has become the most downloaded app in the country, even though it only launched in South Africa six months ago.

South Africa’s taxman has now moved to level the playing ground with this new tax law. In a statement by SARS commissioner Edward Kieswetter, he said: “SARS noted legitimate concerns that have been expressed in the importation of several goods, especially clothing, via eCommerce by a number of importers who have not been paying the obligatory custom duties, resulting in unfair competition with other industry players.”

Looking beyond Shein and Temu

South Africa boasts one of the largest e-commerce markets in Africa. With internet penetration on the rise, consumer behaviour is shifting towards online shopping. The market is poised to exceed $21 billion by 2025, fueled by over a billion annual transactions.

This promising market has attracted local startups and international giants, the most recent being Amazon. The e-commerce giant launched its online marketplace in May and is the fourth most visited online marketplace in South Africa after Takealot, Makro and Temu.

ShopRite also recently introduced online shopping and bulk delivery services for small businesses in South Africa.

How are South Africans shopping?

As of last year, more​​ than 76% of South Africans used the internet, and over one-third of the country’s population uses a smartphone. The widespread use of smartphones has made mobile commerce (m-commerce) a dominant force in the e-commerce sector. Convenience is also a preference among South African online shoppers, with home delivery being a primary driver of online purchases.

​Debit cards are the most popular payment method, followed by online payment services and credit cards.

What are they buying?

Per a report by world wide worx, clothes are the most popular online purchase for South Africans, making up 30% of all online sales. Groceries are the next big thing, with about 22% of shoppers buying their food this way. Interestingly, while electronics used to be a top seller, it's seen a bit of a decline, now making up just over 12% of online sales.
​

Data from world wide worx

What’s holding e-commerce back in South Africa?

Education seems to play a big role in the likelihood of people shopping online. According to the same report, 37% of South Africans shopping online are from cities and towns, with more than half having a post-matric qualification.

Trust is also a big issue. Takealot, a South African e-commerce platform, has recently faced allegations that merchants on its platform sold fake and counterfeit products.

The South African e-commerce market is characterised by a mix of domestic and international players. Takealot, backed by Naspers, holds a dominant position, together with Shein and Temu. The recent entry of Amazon is expected to intensify competition in this space. With the continued involvement of authorities like SARS to make things fair for everyone, the e-commerce market in South Africa is expected to keep growing.

Here are other important stories in the media:

💼 Opportunities

Jobs

We carefully curate open opportunities in Product & Design, Data & Engineering, and Admin & Growth every week.

Product & Design

Data & Engineering

Admin & Growth