South African SMEs can successfully play in the global e-commerce space

E-commerce is a key part of global shopping, offering enormous opportunities to merchants and consumers around the world.

In 2020, a Deloitte study found that more than 70% of South Africans were shopping online compared to the previous year, likely due to Covid-19 lockdowns. In 2022, online spending reached R59 billion. This year, the e-commerce sector grew to R71 billion, representing 6% of total retail trade. Projections suggest that the figure could rise to R225 billion by 2025, reflecting significant growth in online retail.

The rise of e-commerce in South Africa, fuelled by the digital revolution, is provoking mixed reactions: euphoria among consumers, enthusiasm among small and medium-sized enterprises (SMEs) and panic among established retailers and manufacturers.

In today’s economy, price sensitivity greatly influences consumer purchases. Brands that offer convenience, competitive pricing and variety will be best positioned to lead this evolving market.

Global giants such as Shein, Temu and Amazon are rapidly gaining market share and increasing price pressure on traditional local retailers. The rise of relatively new entrants has been met with much resistance from local retailers and the textile industry.

E-commerce contributes significantly to the country’s gross domestic product by creating new jobs, empowering independent couriers and stimulating new markets for SMEs. This enables smaller businesses to compete with larger ones, driving economic growth and improving the standard of living of South Africans.

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By breaking down geographical barriers, e-commerce enables SMEs to access a global clientele. The boom also presents a lucrative opportunity for innovative and entrepreneurial South African SMEs focused on growth to tap into the lucrative Chinese online e-commerce market.

One of the main reasons why e-commerce is an attractive option for SMEs is its affordability. It allows aspiring entrepreneurs to set up businesses with a low start-up cost.

By eliminating the need for physical infrastructure expenses such as rent, warehousing and storefronts, it offers a model that streamlines several aspects of business, such as supply chain management, inventory control and customer service. SMEs can also reduce operational costs and improve efficiency, allowing them to allocate resources more strategically through process automation.

In South Africa, where retail markets are limited, online platforms offer SMEs an affordable alternative to market their products and services globally.

In addition, they can export products and expand their reach, reach new markets and diversify revenue streams. This can be a game-changer for small businesses, opening up opportunities that were previously limited to large companies.

With smart business strategies, innovation and creative marketing, South African SMEs can tap into the global e-commerce market, expand their reach and diversify their revenue streams, while growing the economy. They connect directly with consumers, deliver packages and bring smiles.

Despite the positive role that e-commerce plays in the country’s economy, there is a misconception that low-cost e-commerce sites are destroying the retail business. Claims by some industry professionals that freight forwarders and courier companies do not pay taxes and duties are slanderous and defamatory.

The rise of e-commerce in South Africa, driven by the digital revolution, is provoking mixed reactions

The professional service providers responsible for the transport of goods are Authorised Economic Operators accredited by the South African Revenue Agency, who are closely monitored by customs officials to ensure full compliance with import requirements. Therefore, there is nothing to justify the claims, as all goods are cleared through authorised customs channels.

In addition to being a signatory to the Southern African Customs Union and the European Free Trade Association Free Trade Agreement, South Africa is also a member of the World Customs Organisation and one of 186 member countries that apply de minimis, a special allowance on e-commerce intended to benefit small consumers and businesses.

South Africa charges a 20% de minimis on goods up to R500, while other member countries enjoy a higher threshold, such as the US – $800 (R14 596), the EU – €150 (R2 990) and Australia – A$1 000 (R12 022).

BRICS trade agreements, including those with China, offer significantly reduced or zero tariffs on a range of goods between member countries. The agreements, especially with China, help low-income households purchase essential clothing and apparel. In addition, China’s Belt and Road Initiative aims to enhance trade and investment with Africa, increasing demand for South African products.

Raising tariffs and removing the “small package” exemption, which allows clothing to be purchased at factory prices, will hurt SMEs. SMEs play a vital role in the national economy and are key players in reducing unemployment. South Africa’s threshold is one of the lowest among member countries, and rescinding the exemption could have serious consequences for struggling consumers, industry and the thousands of jobs created by SMEs plugging into e-commerce.