South Africa Launches Investigation into Shein and Temu Over Market Practices

Chinese-owned e-commerce platforms Temu and Shein have gotten probes from the South African National Consumer Commission (NCC) over possible violations of “various provisions” of the Consumer Protection Act (CPA). The SA authority launched the investigation in November due to severe online complaints about the e-commerce companies.

Prudence Moilwa, head of complaints and investigations at the NCC, said the Chinese companies are being investigated for potential breaches of the CPA, covering issues such as marketing practices, product quality, labelling, and disclosure requirements, including any associated fees. The commission has already sent questionnaires to the companies, and the commission is expecting responses that are supported by evidence.

The commission emphasized that if the companies are found guilty of these violations, the matter will be escalated to the National Consumer Tribunal for prosecution, and in that situation, these companies, in principle, could be fined seriously — up to R1 million, or even 10% of their annual turnover in South Africa. And if the companies are guilty of serious offenses, their directors can get up to 10 years imprisonment.

According to Moilwa, both Temu and Shein have promised to help out with the situation completely. Notably, this is not the first time both companies have been on South African authorities' watch. Last year June, the government changed tax laws so that small imported packages are now charged the same high tax as big ones.

They made this move to stop big international online stores, especially stores like Shein and Temu, from using a trick to pay less or no tax on many of their smaller customer orders. This development changed the market landscape for Temu and Shein in South Africa. While they still remain the popular place to go to for low-priced goods, the "golden era" of duty-free cheap imports is effectively over.

The previous rule allowed small orders under R500 to be imported with only a flat 20% duty and no VAT. Now, all orders, regardless of price, are subject to full import duties (that's about 45% for clothing) plus 15% VAT. These tax rules, implemented by the South African Revenue Service (SARS), increased final consumer prices by an effective 40% to 60%. This means you must now pay an "import premium" over the item's listed price.