Temu and Shein must be banned in South Africa – COSATU

South Africa’s largest trade union federation, COSATU, said it would campaign for offshore online retailers Temu and Shein to be banned.

This was after its delegates endorsed a resolution to that effect at its 15th National Congress. Most delegates agreed a ban would support the local market and stimulate job creation.

Shein is a fashion-focused marketplace which has been available in South Africa since 2020. Temu officially launched locally in January 2024. Both operate from China.

Temu and Shein gained popularity by offering South African shoppers low prices, aided by an import duty loophole that has existed since 2007.

The disruption to the local textile industry prompted manufacturers and retailers to accuse the Chinese players of evading tax regulations.

Michael Lawrence, executive director of the National Clothing Retail Federation, said COSATU’s call for a ban was a one-dimensional response to a multidimensional problem.

“What we do think is necessary is that government commits to looking at it with a lot more nuance,” Lawrence told Cape Talk.

He said Temu, Shein, and other offshore online operators were using various pathways to access South African consumers.

“It’s easy for a union to call for a ban. We’ve got to be careful. We don’t want to be anti-competitive, and we do want to ensure we get to the root of the problem.”

The underlying problem, as identified by Lawrence and other industry stakeholders, was South Africa’s customs enforcement.

Lawrence said attempts by the South African Revenue Service (SARS) to close tax loopholes exploited by direct-from-China importers had been ineffective.

When Temu first launched in South Africa, it used an old concession enacted by SARS in 2007 which allowed importers to pay a flat 20% duty on parcels with goods worth R500 or less.

South African companies alleged that Shein used the same concession to avoid paying the 45% duty and 15% VAT that should apply to clothing imports.

South Africa too lenient with Temu and Shein

SARS responded to the outcry by promising to crack down on the concession and levy the full import duty and VAT on all clothing imports, regardless of value.

This was part of a larger reform of South Africa’s customs regime in November 2024 to align with World Customs Organisation guidelines.

However, this plan was delayed, and an interim measure was put in place where SARS would charge 15% VAT on top of the 20% flat duty.

A logistics industry veteran who previously spoke to Newsday on condition of anonymity predicted this outcome, saying customs simply did not have the capacity to process all the imports.

Lawrence and local e-commerce players have said that, years later, South Africa’s import tax regime was still not being effectively enforced on Temu and Shein.

Despite the industry’s concerns around Temu and Shein not being taxed fairly, Lawrence said an outright ban was not the solution. However, something had to be done.

“There have been job losses, and there will continue to be job losses both in manufacturing and in retail,” Lawrence said, pointing to a recent Localisation Support Fund study.

Earlier this year, Localisation Support Fund CEO Irshaad Kathrada said South Africa’s response to protect local manufacturers against Temu and Shein was lacking compared to other countries.

Kathrada said India had refused to allow Shein to operate domestically unless it entered into arrangements with local manufacturers.

“What they said to Shein is: you cannot enter our economy until you enter into arrangements with local manufacturers. We haven’t gone that far. We haven’t had that level of ambition,” he said.