Online marketplace Temu has announced the launch of a local warehouse in South Africa, a move it says will significantly speed up delivery times for shoppers. Items available from this new facility are tagged as “local,” promising delivery within two days, including next-day options. Interestingly, Temu’s platform doesn’t specify which courier will handle these local deliveries, unlike its non-local listings which typically show Buffalo Logistics for import and Fastway for final delivery.
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This warehouse announcement marks Temu’s first major indication of domestic expansion in South Africa since its debut there 18 months ago, in January 2024. The e-commerce platform rapidly gained popularity in South Africa and other global markets, fueled by its aggressive pricing strategies and substantial online marketing spending throughout 2023 and early 2024. A MediaRadar report indicated that Temu boosted its advertising budget by 1,000% in 2023, with a significant portion allocated to paid social media promotions. Temu’s use of gamification, offering steep discounts to first-time shoppers via a virtual spinning wheel, has also proven highly effective in attracting new users. Goldman Sachs previously estimated that Temu’s intense marketing efforts resulted in a loss of $7 per order.
Within months of Temu’s entry into the South African market, it, along with rival Chinese marketplace Shein, faced considerable backlash from local businesses. Online retailers and representatives of South African goods manufacturers raised alarms about alleged tax loopholes being exploited by foreign importers, which allowed them to significantly undercut domestic competitors.
Industry sources pointed to a 2007 concession by the South African Revenue Service (SARS). This concession allowed importers to pay a flat duty rate of 20% without VAT on low-value imports under R500. Originally intended to simplify customs clearance for logistics companies amidst growing international e-commerce, local retailers argued it was being exploited to bypass the 45% duty on imported clothing, creating an unfair playing field, particularly in the clothing and textile sectors. Additionally, local players in the technology sector claimed Temu was permitting merchants to sell goods into South Africa without proper electrical and radio certifications.
SARS initially responded by announcing it would levy the full 45% clothing tax on all applicable imports, including those under R500, starting July 1, 2024. The tax collector estimated that these loopholes, exacerbated by the surge in global e-commerce, led to tax losses nearing R3.5 billion.
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However, SARS subsequently put this plan on permanent hold. Instead, an interim measure was implemented from September 1, 2024, levying 15% VAT on top of the 20% duty on low-value orders. From November 1, 2024, SARS stated it would reconfigure the 20% flat duty to align with World Customs Organisation (WCO) import guidelines. These new rules, however, were only fully implemented in February of this year, to ensure a balance of interests among various industry stakeholders.
Garry Marshall, chair of the South African Express Parcel Association, maintained that neither the Chinese retailers nor their logistics partners acted illegally regarding customs. He stressed that the core issue was the mechanism’s impact on South Africa’s clothing and textile industry. Marshall also highlighted that scrapping the 20% flat duty concession entirely could have disastrous consequences for import procedures, as its primary purpose was not cost reduction but expediting deliveries. He explained that the vast majority of courier traffic clears customs before even arriving in the country, and requiring full tariff code submissions could delay shipments for days.
