SARS turns the tide against Shein and Temu

The South African Revenue Service’s (SARS) efforts to crack down on the uncontrolled growth of foreign online retailers in South Africa is beginning to bear fruit.

This was revealed in the recent release of MustangPay’s South Africa Cross-Border E-Commerce Market Outlook 2025 report.

The report, released in partnership with the South African International E-Commerce Association (SAIEA), drew on cross-border e-commerce data and trends from 2024-2025.

According to the report, South Africa’s cross-border e-commerce growth slowed in 2025 to just 7%, down from annual growth rates between 30% and 50% in the years prior to 2024.

Cross-border platform orders in 2025 totalled approximately 19 million, accounting for 18.6% of all e-commerce transactions in South Africa during that year.

The slowed growth has been partially attributed to adjustments made by SARS to policies around the taxation and duties of cheap foreign imports.

In November 2024, SARS announced the removal of tax exemptions on small-value imports under R500, thereafter applying duties and VAT to all e-commerce transactions in South Africa.

Before this, low-cost retailers such as Shein and Temu were able to exploit this exemption by breaking up large orders into multiple smaller parcels to stay under the R500 threshold.

This was followed by the introduction of a four-tiered tariff structure for all imported goods in February 2025, with VAT on these goods ranging from below 20% to as much as 45%.

These policies have levelled the playing field for local online retailers such as Takealot, allowing them to gain more traction within the sector.

While Shein saw annual growth between 30% and 50% before November 2024, this had slowed to just 11% in 2025, while Temu saw an average monthly decline of 42% during that same year.

Additionally, Shein and Temu began implementing more locally compliant supply chains and merchant programs following the introduction of these policy adjustments.

“While improving tax transparency and protecting local retailers, the policy has raised compliance and cost pressures for the small-parcel direct shipping model,” the report said.

“As a result, cross-border sellers are increasingly shifting towards bulk customs clearance plus local delivery, elevating the strategic role of overseas warehouses and local fulfillment networks.”

Price is no longer the dominant factor

With the slowing growth of cross-border e-commerce in South Africa, MustangPay and SAIEA said this effectively brought “indiscriminate low-price competition” to an end.

Their report found that aggressively low pricing was no longer as crucial of a determining factor for South Africans when making online purchases.

SAIEA Deputy Chairperson Zandile Nzalo explained there had been a shift towards placing more importance on product quality, consumer trust and operational efficiency.

“We are certainly seeing a shift,” Nzalo said. “And one of the most fundamental aspects is that the focus is now more on reliability and on quality and less about price.”

“How that is levelling the playing fields is that the players are now realising that the price wars are nearly a thing of the past right now.”

While the report focused on cross-border e-commerce giants such as Shein, Temu and Amazon, Nzalo said local SMMEs were beginning to adapt the same trends for their own operations.

The report indicated that South African consumers tended to value certainty over affordability, such as the accuracy of the product description or reliable and timeous delivery.

As such, MustangPay and the SAIEA recommended for local e-commerce players to strengthen their operations in these areas, rather than attempting to compete on price.

Another finding of the report detailed the three tiers of purchasing power in the country, and how each of these differ in terms of what items are ordered and for what price.

Tier 1 entails core urban areas including Johannesburg and Cape Town, where higher net-worth consumers prioritise brand value and premium quality for enhancing lifestyle quality.

Tier 2, encompassing growing markets such as Durban and Pretoria, denotes middle-income consumers who prioritise value-for-money items which improve their living standards.

Tier 3 covers lower-income consumers in smaller towns, townships and rural areas, who are highly price-sensitive and focus their e-commerce purchases on daily essentials.

Establishing reliable item delivery networks is considered critical for local e-commerce platforms to be able to compete, especially in Tier 3 areas where digital adoption is heavily built on trust.