Localisation Support Fund Study Flags 34,000 South African Jobs At Risk From Shein And Temu Growth

This is according to a new study commissioned by the Localisation Support Fund (LSF) and conducted by BMA in support of the Retail-Clothing, Textile, Footwear and Leather (R-CTFL) Masterplan.

E-commerce has expanded rapidly, with online clothing sales growing from just 2.4% of total market share in 2015 to nearly 10% in 2024.

Shein and Temu have captured a disproportionate share of this growth - an estimated R7.3bn in sales in 2024, accounting for more than a third of all online clothing sales in South Africa.

Local manufacturing and retail employment undermined

The rise of these offshore platforms has diverted demand away from domestic value chains, undermining local manufacturing and retail employment.

The study estimates that more than 8,100 local jobs - two-thirds in retail and one-third in manufacturing - have not materialised due to their market presence.

If current trends persist, more than 34,000 jobs could be displaced by 2030 if the upper bound scenario were to materialise.

These job losses stand in stark contrast to the progress made under the R-CTFL Masterplan, a social compact adopted in 2019 to boost local sourcing and drive employment growth across the value chain.

The challenge now is to safeguard those gains and ensure the next phase of e-commerce growth supports, rather than undermines, South Africa’s industrial ambitions.

The study models three scenarios - low, moderate, and high growth in Shein and Temu’s market share - and evaluates their impact against different levels of local sourcing.

Under a high-growth scenario with limited intervention, the local impact could reach over R6.2bn in non-realised South African CTFL manufacturing sales, 18 300 manufacturing jobs, and 16,400 retail jobs by 2030.

Offshore operations are causing real distress

Commenting on the findings of the report Simon Eppel, director of Research at the SA Clothing and Textile Workers' Union (SACTWU) said, “The surge in the market of cheap goods from these e-commerce offshore platforms is depressing the prices that local retailers can charge.

This is smash-and-grab economics, an easy way to come into a country, grab what they can, and leave all the costs to us. The report shows that clearly and what's really worrying is the broader impact this will have.

“Right now, we’re seeing the effect on the retail-clothing sector, but what about all the other sectors that are impacted, stationery, furniture and other consumables for example, leather, and other textiles? This is just the beginning, and it’s a precursor of what’s to come.”

“These offshore operations are causing real distress to competition, to the economy and to jobs. If we cannot succeed in mitigating the risk, then we should have banning these apps as an option. We’ve seen countries like India implement a localisation mandate. That’s something we should be looking at very seriously, how to localise these operations, how to bring compliance, and how to make sure they contribute to the local economy.”

While South Africa’s CTFL e-commerce growth has been steady, it still lags international peers. The report notes that local e-commerce penetration, though expected to rise to 15.9% by 2030, remains well below the global average of 40.7%, and even behind emerging markets like Vietnam, Brazil, and Türkiye.

The gap reflects both structural barriers, such as last-mile delivery logistics, and consumer preferences, including continued reliance on brick-and-mortar retail.

The impact of cross-border e-commerce

Globally, governments are taking decisive steps to manage the impact of cross-border e-commerce.

France, Türkiye, Brazil, India, and Indonesia have all introduced policies to level the playing field, ranging from removal of VAT exemptions and customs duty thresholds to local representation requirements, advertising restrictions, and even platform bans.

In India, for example, Shein was only allowed to re-enter the market after entering a joint venture that committed to sourcing goods locally.

In South Africa, the removal of low-value parcel relief by the South African Revenue Service (SARS) in 2024 was a positive step. Imports under R500 are now subject to the standard 45% customs duty and VAT, aligning them with other clothing imports.

However, the LSF report suggests additional policy tools could strengthen local competitiveness. These range from improved product labelling and returns processes, to extended producer responsibility and compliance with POPIA.

Commenting on the findings of the report Eustace Mashimbye, CEO of Proudly SA stated that "The findings of the report are a cause for grave concern particularly as they confirm the extent to which the entry of Shein and Temu in our market has displaced our manufacturing capabilities and cannibalised thousands of jobs. The report paints a grim picture of the lay of the land from stakeholders who are at the coal face of the industry and vindicates the work that Proudly SA has been doing to drive and advocate for localisation.

Over the years we have driven the message of localisation and urged consumers to double down on procuring goods and services locally. To that end, we have launched an online store that provides consumers with much-needed accessibility to locally manufactured goods. Through the e-commerce store, we are offering South Africans an alternative to e-commerce platforms such as Shein and Temu and providing a viable alternative to support and shore up our embattled local industries.

The findings of the report should give us impetus to accelerate the various masterplans and intensify inter-agency collaboration to salvage our industries, nurse them back to health and turbocharge their growth.”

Importantly, the report also highlights lessons for local retailers and manufacturers.

Shein and Temu have succeeded not only because of regulatory loopholes but through their highly digitised, data-driven supply chains, and investment in supplier performance.

With the right support, South African firms could leverage similar approaches to build more agile value chains, capable of competing globally.

The report underscores the need for South Africa to strike a new equilibrium - one that unlocks the growth potential of e-commerce while ensuring fair competition between international and local e-commerce platforms and traditional brick-and-mortar retailers.

Achieving this requires effective policy design and implementation along with innovation across the local value chain.

Irshaad Kathrada, the CEO of the LSF stated that “The projected job losses and decline in local retail and manufacturing output should serve as a wake-up call — to both regulators and industry. While some progress has been made in closing loopholes, South Africa can and should draw more actively from international policy responses. At the same time, the success of offshore e-commerce platforms offers critical lessons for our own retailers and manufacturers.

We need an industry-wide enterprise development programme that better aligns the needs of retailers and their consumers with the capabilities of the local manufacturing value chain.

E-commerce doesn’t have to come at the cost of local industry. The challenge — and the opportunity — is to build a digital retail future that includes South African producers, protects jobs, and competes on both speed and sustainability.”