ITWeb TV: E-commerce Panel Calls for Stricter Temu and Shein Regulations

E-commerce Forum Calls for Stronger Enforcement Against Global Retailers

In a recent discussion, Alastair Tempest, CEO of the Ecommerce Forum South Africa (EFSA), highlighted the challenges facing the local e-commerce sector. He emphasized that while legislation exists, the main issue lies in weak enforcement and insufficient resources to monitor cross-border e-commerce activities.

The South African Revenue Service (SARS) is still struggling to create a fair environment for local retailers compared to global e-commerce giants. The undervaluation of imported goods from China continues to threaten domestic businesses, particularly in the textile industry. This situation could have long-term consequences if not addressed effectively.

Tempest pointed out that platforms like Temu, Shein, and AliExpress exploit weaknesses in SARS's customs processes. These global retailers often avoid paying full tax duties, giving them an unfair advantage over local businesses. From 1 September 2024, SARS began enforcing a 45% import duty plus 15% VAT on all clothing imports, including low-value parcels under R500. However, this has not fully resolved the issue.

"Many parcels continue entering the country with declared values well below their actual worth," said Tempest. "This allows importers to pay substantially less duty than local businesses that import goods through conventional channels."

Despite these changes, SARS acknowledges the problem of undervaluation but lacks the resources to inspect the large volume of low-value shipments. Tempest argued that the solution lies in modernizing customs enforcement rather than introducing new legislation.

One proposal by EFSA is the creation of a dedicated e-commerce customs hub at the airport. This would involve processing all imported online purchases through automated valuation systems before they enter the local market.

E-commerce Growth and Challenges

The e-commerce market in South Africa has seen significant growth, reaching nearly 10% of total retail turnover. This marks a dramatic shift from just a few years ago when e-commerce was barely 1% of total retail sales. Tempest noted that this growth is driven by increased consumer confidence, better payment technologies, improved delivery networks, and investments by retailers during the pandemic.

Trust has been a key factor in this growth. In the early days, consumers were skeptical about online shopping, questioning whether products would arrive and whether payments were secure. However, as larger retailers professionalized their operations, trust in e-commerce has steadily improved.

Retailers such as Checkers demonstrated that rapid grocery delivery could become a reliable service, changing perceptions about online shopping. Tempest highlighted the importance of professionalism in building trust within the e-commerce ecosystem.

The growth of e-commerce has also spurred investment in the broader digital economy, including payment gateways, fintech companies, logistics providers, and technology firms.

Skills Gap and Operational Challenges

While the e-commerce market has expanded rapidly, Tempest believes the next phase of growth will depend on addressing operational weaknesses. Complaints about late deliveries, unavailable stock, misleading advertising, refund disputes, and poor customer service remain significant challenges.

According to the Consumer Goods and Services Ombud, e-commerce-related complaints increased by about 400% between 2020 and 2023. Many of these issues stem from inadequate training rather than deliberate misconduct. For example, some merchants fail to forecast seasonal demand, leading to situations where customers pay for products that are no longer available.

Tempest stressed the need for better training in areas such as data analytics, artificial intelligence, machine learning, and risk management. He compared South Africa’s skills pipeline to countries like China, where universities produce millions of graduates in relevant fields each year.

Enforcement and Legislation

Despite concerns over consumer protection, Tempest does not believe South Africa suffers from a shortage of legislation governing online commerce. Instead, he argues that the main weakness lies in implementing and enforcing existing laws.

He cited examples such as the Consumer Protection Act, the Electronic Communications and Transactions Act, and the Protection of Personal Information Act as regulatory frameworks that are broadly fit for purpose. However, many institutions responsible for enforcement lack sufficient funding and capacity.

Tempest suggested that allowing regulators to retain a portion of the fines they impose could help strengthen future enforcement efforts. He also questioned the speed at which government updates legislation to keep pace with technological change.

"We don't need regulation in five years. We need regulation now. Technology moves far faster than legislative processes, and unless enforcement keeps pace, consumers and businesses are left exposed," he concluded.

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