Unfavorable news for Takealot in South Africa

Takealot in South Africa is embroiled in an eCommerce battle against Chinese newcomers Temu and Shein. No, the aforementioned don’t only clutter your social media feed and inbox with a series of never-ending sponsored posts. Due to what Takealot in South Africa describes as a tax loophole, they’re also demonstrably cheaper, too.

According to an earlier report by The South African, from 1 July 2024, SARS was going to increase its Customs and Excise duties on small orders of less than R500 from these Chinese websites. As a result, it was anticipated that affordable items originating out of the Far East would take a big hit.

TAKEALOT IN SOUTH AFRICA

However, whether down to pressure from the Chinese websites or something else, Daily Investor reports that SARS is shelving the tariff increase … for now. Bad news for Takealot in South Africa and a brief reprieve for Temu and Shein shoppers.

According to the South African International eCommerce Association (SAIEA), SARS is going to ‘engage with stakeholders’ before implementing the 45% tariff increases. This follows months of maneuvering to eliminate the Chinese companies’ competitive advantage. Many local companies argue they don’t have to pay the same import duties and this represents a huge advantage.

WHY ARE THEIR DUTIES SO MUCH LOWER?

Allegedly, Temu and Shein break up even large orders into several smaller quantities to ensure they don’t exceed the R500 limit. Packages under R500 are only taxed at 20% versus 45%, plus 15% value-added tax. Afterwards, they combine the orders again and ship to clients. Consumers always prefer lower-priced items, and this is putting local retailers like Takealot in South Africa under a great deal of pressure.

Of the approximately 100 000 packages coming into South Africa per day, 40% are from Chinese firms, Temu and Shein. Beyond price increases, an additional concern is higher tariffs could create indirect job losses on the courier side. Nevertheless, local retailers have welcomed the proposed tax change, saying it is necessary to create an equal playing field. Specifically, Takealot in South Africa said offshore entities with no physical presence in South Africa extract all the value without contributing to community or skills development and are therefore harming local businesses. But what do you think?