Shein Faces Major Setback in South Africa as SARS Withdraws Key Import Concessions

Global fast fashion giant Shein is facing mounting pressure in South Africa as regulatory changes threaten to shake up the e-commerce landscape. The South African Revenue Service (SARS) has announced its intent to withdraw all long-standing concessions related to customs clearance, a move that could significantly affect Shein’s business model in the country.

The targeted concessions—originally implemented in 2007 to simplify the clearance of low-value shipments under R500—enabled Shein and similar online retailers to pay a flat 20% customs duty. Local retailers have long argued that this gave foreign players an unfair tax advantage, as domestic businesses are subject to a standard import duty of up to 45% on clothing.

SARS Commissioner Edward Kieswetter explained that many of these concessions are now outdated and no longer aligned with current law or technology. “These mechanisms were created decades ago for specific purposes that no longer exist,” Kieswetter said, adding that a formal withdrawal will help ensure compliance with the Customs and Excise Act.

In 2024, SARS began phasing in a clampdown by adding a 15% value-added tax (VAT) to the 20% duty for applicable imports. Now, SARS is proposing a full revocation of all such allowances—triggering cost increases for businesses reliant on these discounts.

Retail Shake-Up and Rising Costs

South African fashion retailers have welcomed the clampdown, citing long-standing concerns over tax fairness. Several accuse importers of exploiting loopholes by splitting large orders into multiple smaller shipments to remain under the R500 threshold.

The impact is already being felt. According to Slant Research, Shein’s market share in South Africa declined notably in 2024, and its 2025 performance lags even further behind. The report attributes this trend to increased import duties and VAT charges, many of which are facilitated by third-party logistics providers such as Buffalo International and Meili Logistics.

“Payment values to these companies surged in late 2024, suggesting government enforcement has influenced transaction costs,” Slant Research stated. However, they also noted a recent drop in enforcement intensity based on the proportion of payments going to logistics providers.

Stakeholders Invited to Respond

While SARS has made its intent clear, the process is still open for public comment until 23 April 2025. Stakeholders can present arguments for retaining specific concessions or suggest legislative amendments. However, absent strong justifications, the withdrawal appears likely.

A spokesperson for PwC cautioned: “The withdrawal of concessions could lead to increased costs for businesses that previously benefited from special allowances or arrangements.”

As Shein grapples with the fallout, this marks a pivotal moment for South Africa’s retail sector. Local players may gain breathing room, while international e-commerce giants will need to rethink their strategy in the region.

{Source: IOL}

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