Offshore e-commerce retailers battering our industries to extinction
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The inaugural report into the impact of foreign owned e-commerce retailers titled: Offshore e-Commerce Disruption in South Africa, makes for grim reading. This report, commissioned by Proudly SA and painstakingly compiled by the Localisation Support Fund (LSF), eloquently illustrates the deleterious impact that offshore e-commerce retailers have had on the South African economy and lays bare how these conglomerates have displaced the country's manufacturing capabilities and cannibalised thousands of jobs in the retail, clothing, textile, footwear and leather (R-CTFL) industries which cumulatively employ over 212 000 people.
Over the past five years, offshore e-commerce retailers have grown rapidly in South Africa's R-CTFL e-commerce space and fundamentally disrupted established local value chains. In 2024, Shein and Temu collectively achieved approximately R7.3 billion in sales, accounting for 3.6% of the total R-CTFL market and 37% of the sector's e-commerce sales. This rapid growth has come at a notable cost to the local economy. The estimated displacement includes R960 million in lost local manufacturing sales, 2 818 associated manufacturing jobs that may have materialised, and 5 282 unmaterialised retail jobs from 2020 to 2024.
What makes the findings of this report more disturbing is when it is juxtaposed against the commencement of the crippling 30% tariffs set to take effect on August 7 that the Donald Trump administration slapped on South African exports to the United States, which are expected to result in a jobs bloodbath in the foreseeable future. The tariffs, coupled with the juggernaut of offshore e-commerce retailers, translate to a debilitating double whammy for a sector that is already buckling under pressure and has haemorrhaged more than two thirds of its workforce since 2005, according to StatsSA.
While the growth of the e-commerce industry, which is fuelled by improved internet accessibility, enhanced security of online payment gateways, diverse online offerings, and deepening smartphone penetration, is welcome, the unabated growth of offshore e-commerce retailers should be countered in order to protect local industries and preserve much-needed jobs in our ailing labour-intensive sectors.
While the report concedes that the penetration of offshore e-commerce retailers is still lower in South Africa compared to its counterparts in other countries, these conglomerates are expanding at a meteoric rate to the detriment of local industries.
The growth trajectory forecasts that the LSF depicts for the offshore e-commerce retailers in the short to medium term are dire for our industries and the economy at best, and calamitous at worst.
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According to the findings of the report, the opportunity cost of Shein and Temu on the clothing, textile, footwear and leather industry has been estimated at a staggering R960 million in lost manufacturing sales, accounting for roughly 2 818 manufacturing jobs and 5 282 jobs not materialising. The unchecked growth of these conglomerates on the sector is equally frightful with estimates of 30 000 jobs lost and approximately R6 billion in manufacturing sales misplaced by 2030.
As a buy local advocacy organisation, Proudly SA has been at the forefront of rallying the public, state-owned entities and government departments, as well as the private sector to ramp up procurement of locally manufactured goods. It is for that reason that we have partnered with the Department of Trade, Industry and Competition to launch an e-commerce store that provides consumers with much-needed accessibility to locally manufactured goods.
Through the e-commerce store, aptly named Shop Proudly SA, we are offering South Africans a viable alternative to e-commerce platforms such as Shein and Temu and an opportunity to support and shore up embattled local industries by buying locally made products.
We are also looking at the feasibility of enhancing this e-commerce platform with export capabilities in the future, which will enable local manufacturers to expand their market beyond their geographical confines. The export capabilities of the store will also give credence to the growing call by President Cyril Ramaphosa and organised business formations such as Business Unity South Africa (BUSA) for affected industries to find alternative markets to offset the 30% tariffs that the Trump administration has levied on South African exports to the United States and ensure the long-term sustainability of all affected industries beyond the R-CTFL sectors.
The findings of the LSF report should give us impetus to accelerate the various sectoral masterplans and intensify inter-agency collaborations in order to salvage our industries, nurse them back to health and turbo charge their growth. It also vindicates our clarion call for the ramping up of industrialisation which mirrors the findings of the study we undertook together with Dr Iraj Abedian's Pan African Investment Research Sevices, which found that a 10% increase in manufacturing activity will result in 8% job creation.
With the spectre of stubbornly high unemployment looming ever larger, inequality expanding to cavernous levels, and poverty deepening by the day, ramping up our manufacturing capacity as well as a corresponding uptake of locally made products is no longer an option but an existential necessity.
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