A multitude of individuals have appended their signatures to a petition challenging the decision by the South African Revenue Service (SARS) to abolish a previously beneficial tariff concession on imported clothing from online platforms like Shein and Temu.
Key Takeaways
- Tariff Regulation Changes: The South African Revenue Service (SARS) has closed a loophole that allowed importers to pay reduced duties and VAT on clothing imports under R500. The new rule, applying a 45% tariff and VAT on all clothing imports, aims to support local businesses by ensuring fair competition.
- Impact on Local Industry: The adjustment is part of South Africa’s Retail-Clothing, Textile, Footwear, and Leather Masterplan, which strengthens local factories and increases jobs. The plan has led to the creation of over 20,000 jobs and boosted local sourcing of products by nearly 60%.
- Consumer Concerns: The increased tariffs have sparked significant public opposition, with over 24,000 people signing a petition against the change. Consumers worry about higher prices for imported goods, potentially limiting access to affordable clothing, highlighting the importance of balancing local industry support with consumer affordability.
Loophole Closed to Protect Local Markets
Prior to the 1st of November, importers were liable for a 45% duty on clothing exceeding R500 in value, as well as Value Added Tax (VAT). However, a concession had been in place for goods valued below R500, where importers were charged a fixed rate of 20%, with no VAT. This arrangement enabled exporters to distribute their shipments in multiple small parcels under the R500 threshold, thus evading the higher duty rate and VAT.
Simon Eppel, the director of policy and research at the Southern African Clothing and Textile Workers Union (SACTWU), explained that this loophole had allowed companies like Shein and Temu to offer their products at significantly reduced prices, thereby undercutting South African retailers and adversely affecting local manufacturing plants.
From November onwards, all imports valued under R500 will attract the standard 45% tariff along with VAT. SARS has declared this adjustment, acknowledging the genuine concerns raised about the unfair competitive advantage previously enjoyed by certain importers who had been bypassing customs duties and VAT.
According to SARS, the introduction of VAT on these imports and the reconfiguration of duty regulations commencing from 1 November are direct responses to these concerns.
Tip: When shopping for imported goods, always consider the total cost including tariffs and taxes to avoid unexpected expenses.
Unreported Merchandise
Undisclosed goods are a major issue, as stated in the South Africa’s Retail-Clothing, Textile, Footwear, and Leather Masterplan, which was initiated in 2019 to bolster local factories and boost employment within the sector. Eppel noted that the Masterplan has successfully generated over 20,000 jobs and significantly increased the procurement of locally produced clothing, accessories, and footwear by nearly 60%.
The Masterplan also focuses on reducing customs fraud, a significant hurdle for clothing manufacturers, with strategies to combat the misclassification and under-invoicing of goods that enable tariff evasion and result in artificially low prices that harm local manufacturers. Under this plan, SARS has enhanced its inspection and confiscation of falsely declared goods.
Michael Lawrence, the executive director of the National Clothing Retail Federation, expressed the difficulty in quantifying illegal activities, pointing out the substantial discrepancies between the export declarations from China and the import declarations in South Africa.
Zakhele Mthembu, a policy officer at the Free Market Foundation, voiced concerns to GroundUp about the impact of the new tariffs on consumers who rely on affordable clothing, suggesting that the government’s measures, prompted by domestic business interests, aim to increase the cost of imports to push consumers towards more expensive locally sold goods.
In opposition to the tariff adjustments, more than 24,000 individuals have rallied behind a petition on change.org urging SARS to reconsider its decision, arguing that the affordability of outlets like Shein and Temu is crucial for South Africans who find local prices prohibitive.
Perspectives from Shoppers
A GroundUp staff member shared an experience of purchasing a pair of fashionable boots from Shein for R300, a price significantly lower than what she would have paid at local stores, where she would have hesitated due to the higher cost.
It remains challenging to directly compare clothing items across different retailers, as identical products are rarely available from multiple sources. However, an example cited includes an orange sundress from Shein priced at R132, inclusive of tariffs, in contrast to a similar item at a local retailer priced above R200.
The Temu website impressed with its speed and extensive range of options for items like men’s jeans, unlike a popular local clothing chain’s website, which was slower and offered fewer choices. However, both Shein and Temu are frequently criticised online for their product quality and customer service. The Guardian even likened shopping on Temu to a gamble.
Conversely, returning items to major South African retailers like Mr Price or Foschini is usually a straightforward process, unlike the potentially frustrating experience of online returns, which demands more consumer trust. Temu’s return policy, although thorough, involves a complex process of packaging and courier services to secure a refund.
Despite the grievances aired on Hello Peter, a consumer review platform, about challenges in obtaining, returning, or getting refunds for purchases from Shein and Temu, the continued success of these platforms indicates a significant level of consumer trust in their delivery models.
Tip: Always check return policies when shopping online to ensure you can return unsatisfactory products without significant hassle.
In terms of labour conditions, both Shein and Temu, primarily operating out of China, are known for offering very low wages under challenging working conditions, in stark contrast to standards in South Africa. Shein, established in 2008 in Nanjing, and Temu, launched in 2022, operate as online marketplaces facilitating direct exports from China to global consumers. Their operations have been marred by controversies and criticism concerning their labour practices, as noted on their Wikipedia pages.
Conclusion
The recent decision by the South African Revenue Service to impose a 45% tariff and VAT on all clothing imports, regardless of value, marks a significant shift in trade policy aimed at protecting local industries and jobs as part of the broader Retail-Clothing, Textile, Footwear, and Leather Masterplan. While this move is intended to level the playing field for local businesses against cheaper international imports, it has also sparked a robust public response, with thousands signing a petition in protest. This reaction underscores the challenge of balancing the need to support domestic production with the consumer’s demand for affordable clothing, highlighting a critical tension in economic policy that impacts both the market and the everyday lives of South Africans.
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