SA’s Top E-Tailer Wary Of New Offshore Players Undercutting The Market

By  |  May 2, 2024

Takealot, South Africa’s leading e-commerce platform, has expressed concern that a new wave of popular retail marketplaces that ship worldwide are playing by their own rules unopposed and undermining the country’s economy.

The e-tailer is engaging in discussions with both governmental and non-governmental bodies within the nation to address concerns regarding the regulation of offshore e-commerce operations, particularly focusing on Chinese-born booming upstarts like Temu and Shein, reports Mybroadband.

During an interview with 702, CEO Fred Zietsman highlighted the disparity in regulatory adherence between third-party sellers on Takealot’s platform and emerging players like Temu and Shein. Zietsman emphasized that while sellers on Takealot are obligated to pay import duties and taxes for imported goods, newer entrants often sidestep these regulations, creating an uneven playing field.

“If I’m a third-party selling on Takealot’s marketplace, I import my goods from abroad and I pay my import duties, VATs, and tariffs, which puts an inflationary part into my pricing,” he said. “I think it’s clear if you read the media that some of the new players don’t necessarily follow that.”

The Takealot boss also stressed the importance of addressing this issue, stating that revenue leakage to the country’s treasury undermines crucial economic factors such as industrialisation, import substitution, economic growth, and job creation. He urged for a clear understanding of the implications of offshore online operations, particularly emphasizing the necessity for businesses to contribute to the local economy through physical infrastructure and local employment.

Although Zietsman did not explicitly name Temu and Shein, his remarks were prompted by inquiries regarding the entry of these global e-commerce giants into South Africa. Notably, Amazon’s forthcoming marketplace launch in the country was distinguished from the concerns raised, given its commitment to local operations and employment.

Earlier in February 2024, Michael Lawrence, the executive director of the National Clothing Retail Federation (NCRF), voiced similar concerns about companies like Temu and Shein exploiting tax and import duty loopholes. Lawrence highlighted how these practices adversely affect local retailers, jeopardize employment opportunities, and result in reduced revenue for the country. The NCRF has raised these issues with the South African Revenue Service, citing discrepancies in the reporting of duties and taxes by local couriers and service providers.

The concerns voiced by South African retailers led to calls for governmental intervention to address the alleged tax loopholes being exploited by Temu. The government imposes a 45% tax and VAT on imported clothing to safeguard local manufacturers against the threat of cheap exports.

However, investigations conducted by the NCRF revealed significant discrepancies in the taxation applied to packages from Temu and Shein, often resulting in substantially lower tax rates than mandated and markedly lower prices that undercut local competitors.

In response to these allegations, Temu released a statement affirming its commitment to compliance with local laws and regulations. The company clarified that duties and taxes are not included in the prices displayed on its South African platform, with these charges being levied by local authorities upon parcel arrival. Temu asserted its collaboration with a reputable logistics partner to ensure compliance with customs laws and the proper processing and remittance of applicable taxes.

The ongoing dialogue between e-commerce stakeholders, regulatory bodies, and government agencies underscores the need for a comprehensive approach to address the regulatory challenges posed by offshore e-commerce operations in South Africa, ensuring fair competition and adherence to fiscal regulations.

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