South African clothing industry faces R6.2 billion threat from Temu and Shein

The entrance of offshore e-commerce retailers, such as Temu and Shein, in South Africa threatens to cost the country over R6.2 billion in lost clothing manufacturing revenue by 2030.

This is according to a recently-published report commissioned by the Localisation Support Fund.

South Africa has seen rapid growth in the retail, clothing, footwear, and leather (R-CTFL) e-commerce market over the past decade or so.

Between 2015 and 2024, R-CTFL e-commerce penetration increased from 2.4% to 9.9%. At the same time, the market’s value has increased from R3.5 billion to R20.1 billion over the period.

This represents a compound annual growth rate of 14.4%, significantly higher than the industry’s overall rate of 4.3%.

With this growth came the entrance and increased use of offshore e-commerce retailers, such as Temu and Shein.

The two retail giants have seen significant success in South Africa, with combined sales reaching R7.3 billion in 2024. 

However, this has come at a cost to South Africa. The report states that offshore e-commerce platforms have cost the country R960 million in lost local manufacturing sales.

It adds that between 2020 and 2024, these retailers also caused the country to lose an estimated 2,818 associated manufacturing jobs and 5,282 retail jobs that may have materialised.

Similarly, the report points out that if Temu and Shein continue their growth trajectory, this could cost the country over 34,000 jobs and R6.2 billion in manufacturing sales by 2030 in the most extreme case.

“In this scenario, we estimate significant losses in local employment due to the market share gains of companies like Shein and Temu,” BMA principal consultant Sean Mecer said.

The report says the significant growth of these platforms is due to the highly optimised and digitised business models, such as Shein’s real-time production scheduling and Temu’s ultra-low pricing model.

LSF says this allows these platforms to offer speed, variety, and affordability at a scale that most local retailers can’t compete with.

These platforms achieve this by leveraging offshore manufacturing, low shipping costs, de minimis trade allowances, and data-driven consumer targeting.

This made goods sold on Temu and Shein significantly more affordable than the rest of the South African R-CTFL market.

“The surge in the market of cheap goods from these eCommerce offshore platforms is depressing the prices that local retailers can charge,” said Simon Eppel, Director of Research at the South African Clothing and Textile Workers’ Union.

“This is the model of retail that will come to dominate, so we as the retail market are the litmus test to some extent, projecting out the damage to one sector of the economy.”

Protecting the local market

While local retailers have seen some growth over the past few years, it does not compare to that of larger international retailers.

For instance, The Foschini Group grew its e-commerce penetration from 9% in 2019 to 9.8% in 2024, Mr Price from 1% to 2.5%, and Woolworths from 1.3% to 4.1%.

On the other hand, the report found that H&M’s South African e-commerce penetration during the period grew from 15.9% to 26.7%, while Zara’s grew from 12% to 23%.

However, local retailers still comprise the majority of the overall R-CTFL market share at 74%, this includes e-commerce and brick and mortar stores, followed by H&M, Zara, and Cotton On at 3.4%.

What is most suprising though is that Temu and Shein have overtaken H&M, Zara, and Cotton On’s combined overall market share by controlling 3.6% of the market by 2024.

This has become a concern to many South African businesses given that Shein only entered the country in 2020 and Temu entered at the beginning of 2024.

Given the affordability of the Chinese retailers’ products, use of the platforms spread through South Africa like wildfire.

In 2024, MyBroadband reported that Temu and Shein were using a special Sars concession to keep taxes low for imports below R500.

The concession allowed logistics companies to pay a flat import duty of 20% and no VAT on items valued below this threshold. 

This was initially implemented in 2007 to speed up clearance processes when e-commerce picked up steam in the country.

After increased pressure from local industries, Sars announced that it would begin levying the full R45% tax on clothing items under R500 from 1 July 2024.

However, this plan was put on hold, and interim measures were introduced, including levying VAT and a 20% flat duty on imports from 1 September.

In addition, the taxman said that it would reconfigure the 20% flat rate for low-value orders into the World Customs Organisation Framework.

The framework was developed in the 1990s to address the high volume of small, negligible-value goods carried between countries.

This was implemented on 1 November 2024, and full duties were charged on clothing, footwear, textiles, and leather. Rates for these items ranged from 20% to 45%.

On 1 February 2025, Sars’ new regulations for product imports took full effect, with goods falling into four categories based on the duty applied.

These include correspondence and documents with no commercial value, low-value consignments below a specified de minimis threshold, low-value dutiable goods above a de minimis threshold, and high-value consignments.

Following this, Sars Commissioner Edward Kieswetter issued a letter titled “Intentions of the Sars Commissioner to withdraw all concessions,” giving businesses 21 days to present a case for keeping the concessions.

None of these concessions have been removed at the time of writing.