Temu and Shein can cost South Africa 34,000 jobs

If Shein and Temu continue taking market share at their current rates, South Africa could lose over 34,000 clothing retail and manufacturing jobs. 

The rise of these offshore platforms poses significant challenges for South Africa, with much of the focus being on the tax treatment of their imported goods as the Chinese giants took advantage of a loophole. 

Now that the loophole has been closed by SARS, there has been a shift in attention towards the potential impact of Shein and Temu on local clothing supply chains. 

To understand this impact, the Localisation Support Fund (LSF) commissioned a study to analyse the rise of Shein and Temu in South Africa and how they have displaced traditional retailers. 

The study found that eCommerce as a sector has expanded rapidly, with online clothing sales growing from just 2.4% of total market share in 2015 to nearly 10% in 2024. 

Shein and Temu have captured a disproportionate share of this growth, with an estimated R7.3 billion in sales in 2024, accounting for more than a third of all online clothing sales in South Africa.

The rise of these offshore platforms has diverted demand away from domestic value chains, undermining local manufacturing and retail employment. 

The study estimates that more than 8,100 local jobs,  two-thirds in retail and one-third in manufacturing, have not materialised due to the market presence of Shein and Temu. 

If current trends persist, more than 34,000 jobs could be displaced by 2030 if the higher-end scenario were to materialise.

Under a high-growth scenario with limited intervention, the local impact could reach over R6.2 billion in non-realised South African clothing manufacturing sales, 18,300 manufacturing jobs, and 16,400 retail jobs by 2030.

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

“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.” 

Protecting local suppliers

The primary response to the rise of Shein and Temu, so far, has come from SARS, which has moved to close the loophole exploited by the low-cost importers. 

Shein and Temu exploited a South African tax loophole by avoiding VAT and paying lower import duties.

The so-called ‘de minimis’ rule allowed parcels containing clothing with a value of less than R500 through customs with a payment of only 20% import duty and no VAT.

Local retailers have always had to pay 45% customs duty as well as 15% VAT on all imported clothes. 

In South Africa, SARS removed the low-value parcel relief in 2024. Imports under R500 are now subject to the 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.

The government has also driven the implementation of a clothing and textile masterplan to boost local production through a social compact adopted in 2019 to boost local sourcing and drive employment growth across the value chain.

LSF’s report also highlighted lessons for local retailers and manufacturers. Shein and Temu have succeeded not only because of regulatory loopholes but also because of their highly digitised, data-driven supply chains and investment in supplier performance. 

With the right support, South African firms could leverage similar approaches to build more agile value chains, capable of competing globally, the report said.

“The projected job losses and decline in local retail and manufacturing output should serve as a wake-up call to both regulators and industry,” Irshaad Kathrada, the CEO of the LSF, said. 

“ECommerce doesn’t have to come at the cost of local industry. The challenge – and the opportunity – is to build a digital retail future that includes South African producers, protects jobs, and competes on both speed and sustainability.”

Shein responded to the publication of the report, saying that it will continue to focus on its large and growing customer base in South Africa.

“We are proud that millions of consumers around the world, including our large and growing customer base in South Africa, choose to shop with us because they recognise our focus on value and quality,” Shein said.

“We are committed to building on this by empowering more local brands and creative talent to engage with Shein consumers around the world, as demonstrated by our 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.”

“This model fundamentally differs 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.”