Shein, Temu could cost economy R6.2bn by 2030 as offshore retailers disrupt SA job market

The Localisation Support Fund (LSF) has warned about the looming threat posed by offshore e-commerce retailers (OERs) to South Africa's job market, despite regulatory efforts intended to mitigate this issue.

As the South African economy grapples with high unemployment rates of 32.9%, the stakes have never been higher. 

A recent study conducted by B&M Analysts (BMA) and commissioned by the LSF revealed that at least 2 800 manufacturing jobs projected for 2024 did not materialise while 5 000 retail jobs were displaced due to the dominance of fast-fashion international giants, Shein and Temu.

Presenting the findings of the study on Tuesday, BMA principal consultant, Sean Mercer, highlighted the impact that platforms such as Shein and Temu have had on the retail clothing, textile, footwear, and leather (R-CTFL) industry.

Mercer said the retail sales figures of these companies skyrocketed to over R7 billion in 2024, adding that this explosion in sales raised serious concerns about the sustainability of local industries when confronted with aggressive foreign competition.

While total retail sales in the R-CTFL industry have surged from R117bn to R203bn between 2011 and 2024, with an average annual growth rate of about 4.3%, the e-commerce sector has experienced an even more remarkable climb.

The 64-page report showed that e-commerce's share of the total retail market has risen from a mere 2.4% in 2015 to an estimated 10% in 2024, with projections suggesting that this figure could climb even higher to 16% by 2030.

Between 2020 and 2024 alone, Shein and Temu captured approximately 3.6% of the total market share at a remarkable pace, outstripping traditional local retailers who took years to achieve similar penetration.

"For example, if we were to compare it against [other international retailers like H&M and Zara], those retailers have acquired this market share over a period of 13 years, and Shein and Temu have managed to match and surpass that in just a five-year period," Mercer said.

"So those are retail sales that are by all accounts not flowing through the local value chain, and in that sense not contributing to local employment growth and manufacturing growth in turn."

The report outlines five growth scenarios for offshore platforms, forecasting that if current trends persist, up to 34 000 jobs could be adversely affected by 2030.

Under the worst-case scenario, the research indicates that South Africa's economy could lose approximately R6.2bn in annual manufacturing sales, alongside the potential for 16 400 manufacturing jobs and 18 300 retail jobs to be displaced.

“In this scenario, we estimate significant losses in local employment due to the market share gains of companies like Shein and Temu,” Mercer noted, urging for proactive measures to mitigate these impacts on the South African value chain.

A critical takeaway from the study was the recent closure of what had long been considered the biggest loophole in South African e-commerce: the de minimis principle.

In South Africa, the removal of low-value parcel relief by the South African Revenue Service (SARS) in 2024 was a positive step.

Imports under R500 are now subject tothe standard 45% customs duty and VAT, aligning them with other clothing imports.

However, the LSF report suggests additional policy tools could strengthen local competitiveness. These range from improved product labelling and returns processes, to extended producer responsibility and compliance with POPIA.

Courtney Grant, head of buyer-led value chains at BMA, said countries like France and Turkey have already demonstrated proactive measures such as restricting advertising for ultra-fast fashion brands, protecting local consumer interests and brand integrity.

These countries provided compelling insights into effective policies, exploring varying approaches to regulating low-value purchases, customs duties, and consumer protection.

Grant said these countries' regulatory frameworks regulated not just the retail market but also the customs enforcement required to streamline the evolution of small parcel imports, which are now at the forefront of consumer purchasing habits.

"And beyond just pure tariffs, we looked at registration and licensing requirements for offshore online retailers, Extended Producer Responsibility (EPR) regulations. And interestingly, through the findings, there were several other considerations that came through," Grants said. 

Eustace Mashimbye, CEO of Proudly SA, said the report was a rude awakening.  

"The findings of the report are a cause for grave concern particularly as they confirm the extent to which the entry of Shein and Temu in our market has displaced our manufacturing capabilities and cannibalised thousands of jobs," Mashimbye said.

"The report paints a grim picture of the lay of the land from stakeholders who are at the coal face of the industry and vindicates the work that Proudly SA has been doing to drive and advocate for localisation." 

Simon Eppel, director of research at the SA Clothing and Textile Workers' Union (SACTWU), said the surge in the market of cheap goods from these e-commerce offshore platforms was depressing the prices that local retailers can charge.

"This is smash-and-grab economics, an easy way to come into a country, grab what they can, and leave all the costs to us. The report shows that clearly and what's really worrying is the broader impact this will have.

"This is just the beginning, and it’s a precursor of what’s to come. These offshore operations are causing real distress to competition, to the economy and to jobs. If we cannot succeed in mitigating the risk, then we should have banning these apps as an option." 

UPDATE**

Temu has responded to this Business Report article. In an emailed statement, the company said, "Temu has expanded the range of quality products available to South African consumers, giving them greater choice and access to items that meet their needs."

Shein also responded to the article, saying that it was proud that millions of consumers around the world, including its large and growing customer base in South Africa, choose to shop with the company because they recognise its focus on value and quality.

Robin Kiely, Shein director for orporate communications for the EMEA region, said they were committed to building on this by empowering more local brands and creative talent to engage with their consumers around the world, as demonstrated by their recently-announced partnership with local South African brand, House of One.

"We operate a customer-driven, on-demand business model. Instead of trying to forecast trends and customer demand, SHEIN leverages digital supply chain technology to adapt our procurement decisions according to our customers’ preferences and purchases," Kiely said.

"This model is fundamentally different from traditional mass-production approaches, specifically in reducing excess inventory waste. We believe our approach represents part of the solution by reducing overproduction and waste at the source, and maintaining affordability."

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