The South African Revenue Service’s customs system is still failing to create a level playing field between local retailers and global e-commerce giants, despite changes to import rules.
As the widespread undervaluation of imported e-commerce goods from China continues to undermine domestic businesses, this will result in dire consequences for SA’s textile industry in the long-term.
This is the warning from Alastair Tempest, CEO of the Ecommerce Forum South Africa (EFSA), who believes online shopping’s biggest challenge is not inadequate legislation, but weak enforcement and a lack of resources to police cross-border e-commerce.
Speaking to ITWeb TV, Tempest said global online retailers such as Temu, Shein and AliExpress have continued to exploit weaknesses in SA’s customs processes. This leaves local manufacturers and retailers competing against imported goods that often avoid the full tax duties intended by law.
From 1 September 2024, SARS began enforcing the 45% import duty plus 15% VAT on all imported clothing, including low-value parcels (under R500) that had previously benefited from a concession.
However, this has not done enough to level the playing field between local retailers and global e-commerce platforms, which have absorbed a large portion of online retail spending in SA, without contributing proportional local tax revenues.
Tempest said SARS has acknowledged that many imported parcels are significantly undervalued, but lacks the resources to inspect the sheer volume of low-value shipments entering the country.
"The problem that we have faced with Temu and Shein has been that they saw a loophole. They abused exactly the same system in other markets so we're not the only ones. They realised you could import products under a certain value without paying the full customs duties, and that's what they did."
Temu and Shein have in the past denied any wrongdoing, noting they adhere to local laws.
While SA has tightened the tax treatment of low-value imports, Tempest argues that the changes have not fully addressed the underlying problem.
He said many parcels continue entering the country with declared values well below their actual worth, allowing importers to pay substantially less duty than local businesses that import goods through conventional channels.
"According to SARS, one of our biggest problems is that these imports are chronically undervalued. If you're paying customs duty on a product declared at R100, when it's actually worth R500, obviously that's going to cause problems. The concern is that they recognise the issue but simply don't have the staff to deal with the sheer volume of parcels."
Tempest said the situation continues to disadvantage South African manufacturers, particularly the textile industry, which has struggled to compete against ultra-low-priced imported clothing.
"It has hollowed out textile manufacturing here. Other forms of manufacturing have also been affected. What we've consistently argued is that we need a level playing field where the same laws, the same rules, the same taxes and the same customs duties apply to everyone selling into South Africa."
Tempest believes that rather than introducing entirely new legislation, government should focus on modernising customs enforcement.
One proposal being advanced by EFSA is the creation of a dedicated e-commerce customs hub at the airport, where all imported online purchases destined for SA would be processed through automated valuation systems before entering the local market.
E-commerce nears 10%
The debate over customs enforcement comes as SA’s e-commerce market reaches a milestone that would have seemed improbable just a few years ago.
According to Tempest, online retail has expanded from barely 1% of total retail turnover in 2019, to almost 10% today, with the sector expected to reach the double-digit mark within the next year.
The rapid growth reflects a combination of increased consumer confidence, better payment technologies, improved delivery networks and significant investment by retailers that accelerated during the COVID-19 pandemic.
"Let me put it into perspective. In 2019, e-commerce was barely 1% of total retail turnover. Today it's almost 10%. It will definitely reach 10% if not this year, next year."
Tempest said the figures demonstrate how dramatically attitudes towards online shopping have changed over the past six years.
When EFSA was established nearly a decade ago, its primary focus was building trust among both consumers and businesses, many of whom viewed online commerce with suspicion.
He said consumers at the time questioned whether products would arrive after paying for an order, whether payments were secure and whether online merchants could be trusted with personal information, while many businesses remained reluctant to sell online altogether.
That trust has steadily improved as larger retailers professionalised their online operations and consistently delivered on customer expectations.
Retailers, such as Checkers, transformed perceptions by demonstrating that rapid grocery delivery could become a reliable everyday service rather than an ambitious promise.
"I think a lot had to do with the fact that the players in the sector became more professional. Trust remains the key to e-commerce because without trust we're dead. The professionalism that organisations like Takealot brought to the ecosystem has made an enormous difference."
The growth has also fuelled investment across the wider digital economy, including payment gateways, fintech companies, logistics providers and technology firms that support the broader e-commerce ecosystem.
Growing skills gap
While SA’s e-commerce market has expanded rapidly, Tempest believes the industry's next phase of growth will depend less on consumer demand and more on addressing operational weaknesses that continue to frustrate shoppers.
Complaints about late deliveries, unavailable stock, misleading advertising, refund disputes and poor customer service remain among the biggest challenges facing the sector.
According to the Consumer Goods and Services Ombud, e-commerce-related complaints increased by about 400% between 2020 and 2023, and now account for roughly 20% of all complaints received by the office.
Tempest said many of these issues stem from inadequate training rather than deliberate misconduct. For example, some merchants fail to forecast seasonal demand, leading them to accept payment for products that have already sold out.
Others lack the systems needed to manage inventory accurately or resolve customer complaints quickly.
"The people running these businesses have not always had the proper training. Stock management is extremely important because demand changes throughout the year. If you take the customer's money and then discover you don't have the product, the customer is understandably going to be very annoyed."
He believes SA has not invested sufficiently in the digital skills required to support a modern e-commerce economy.
“Data analytics, artificial intelligence, machine learning and risk management are becoming increasingly important as retailers seek to personalise shopping experiences, optimise supply chains and combat fraud.”
Tempest compared SA’s skills pipeline with countries such as China, where universities produce millions of graduates each year in engineering, analytics and information technology disciplines.
"We really need to look at education. We need to ask ourselves whether we're creating graduates with the skills that businesses actually need. Either we're satisfying the professors and teachers, or we're satisfying the young people who need jobs, and for me the choice should be obvious."
Enforcement first
Despite concerns over consumer protection, Tempest does not believe SA suffers from a shortage of legislation governing online commerce.
Instead, he argues that the country's biggest weakness lies in implementing and enforcing laws that already exist.
He cited legislation such as the Consumer Protection Act, the Electronic Communications and Transactions Act and the Protection of Personal Information Act as examples of regulatory frameworks that remain broadly fit for purpose.
The problem, he said, is that many of the institutions responsible for enforcing those laws lack sufficient funding and capacity.
"The regulations aren't that bad. The Protection of Personal Information Act, for example, is a good Act. The difficulty is that the regulators are not funded properly, so implementation simply doesn't happen at the level it should."
Tempest pointed to the National Consumer Commission, the National Consumer Tribunal and the Information Regulator as examples of institutions whose effectiveness is constrained by limited budgets.
He suggested SA should consider allowing regulators to retain a portion of the fines they impose to strengthen future enforcement efforts rather than returning all proceeds to the National Treasury.
Tempest also questioned the speed at which government updates legislation to keep pace with technological change.
SA’s Electronic Communications and Transactions Act dates back more than two decades, while significant delays in implementing newer legislation have slowed regulatory responses to the evolving digital economy.
"We don't need regulation in five years. We need regulation now. Technology moves far faster than legislative processes, and unless enforcement keeps pace, consumers and businesses are left exposed,” Tempest concluded.
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