Why SA’s e-commerce success risks declining into a ‘country of warehouses’

The streets are alive, not with the sound of music, but with the hum of delivery bikes, Courier Guy vans, and payment app chimes. South Africa’s digital economy marches on, a choir of clicks and wheels, but even the sweetest song can falter if its cogs aren’t aligned.

That warning comes from “Seizing the Moment: Unlocking South Africa’s Ecommerce Promise”, a new report from the Ecommerce Forum South Africa in partnership with the Mapungubwe Institute for Strategic Reflection and Takealot. 

Speaking at the launch of the report, Phuthi Mahanyele-Dabengwa, CEO of Naspers South Africa, said that the country “stands at a digital crossroads”, adding that with the right investment and collaboration, “we can not only drive South Africa forward, but can drive the African continent forward”. 

Read more: In South Africa’s e-commerce boom, trust beats automation

This crossroads seems to be fast approaching. The report warns that fragmented regulation, digital exclusion and unfair competition from global giants are choking the potential of local players. 

Ecommerce Forum SA CEO Dr Alastair Tempest likened e-commerce to a watch. 

“It looks simple from the outside, but if the cogs and wheels don’t work together, it won’t keep time.” 

The paradox of progress

South Africa’s e-commerce share of retail has grown from less than 1% in 2019 to nearly 10% today, according to the report, which moves the country from “emerging” to “expanding” in e-commerce development. In 2024, the sector was estimated to have exceeded R96-billion in value, with projections for it to reach R130-billion this year. 

However, the glow of progress masks a more troubling paradox. South Africa’s e-commerce ecosystem is mature by global standards, more advanced than Brazil or India, according to Mapungubwe Institute for Strategic Reflection senior researcher Machete Rakabe, but the benefits are bleeding outwards.

While the ecosystem is developed, South Africa is losing out on the ecommerce dividend. The institute’s research found that the country is failing to capitalise on the benefits commensurate with its level of ecosystem maturity. 

Read more: Shein, Temu strike Takealot where it hurts as e-commerce giant grapples with loss

The growth is real, but the gains are not staying home. A total of 74% of local online shoppers are spending their money on international platforms. The result, Rakabe said, was an “externalisation effect”, meaning people were buying from international platforms and local platforms were losing out on local e-commerce demand.

The big five threats

The report identifies five structural challenges that threaten to derail e-commerce growth. 

Firstly, foreign platforms like Shein and Temu are eating South Africa’s lunch. They operate with lower compliance costs, exploit regulatory loopholes, and have rapidly captured more than a third of local online clothing sales, the report notes. 

This redirection of demand away from local value chains is projected to continue, with their market share potentially rising to R22.2-billion by 2030, placing more than 34,000 local manufacturing and retail jobs at risk.

Takealot group CEO Frederik Zietsman warned that unless the imbalance is fixed, “we will become a country of warehouses, and not a country of factories”. 

Then oversight is splintered across a maze of agencies — the SA Revenue Service, Independent Communications Authority of SA, the Competition Commission, the Department of Trade, Industry and Commerce, and the National Consumer Commission — each guarding its turf.

Rakabe noted that there is a “government of regulations” that affects e-commerce itself, where matters sit with different custodians, different regulators, and at different levels. 

Read more: Behind the speedy MyMzansi screens and the Presidency’s race to build a digital government

For instance, legal acts, technical acts and competition acts are all separate. When there are payment issues, one must approach the bank, but consumer protection requires approaching another regulator, and product standards yet another. 

“The regulators of today are working with laws designed for a very old-age economy,” said Hardin Ratshisusu, the Deputy Commissioner of the Competition Commission and Acting Commissioner of the National Consumer Commission. 

Local markets and production  

The third challenge is that without strong localisation policies, online trade risks hollowing out South Africa’s industrial base. 

Irshaad Kathrada, the CEO of the Localisation Support Fund, said that the country must “build a defensive mode” through local production — goods made “for us, by us”.  

One can’t speak about e-commerce without addressing digital exclusion as the country’s R900-billion township and rural economies remain digitally sidelined.

Read more: Bridging the digital divide with ambitious plan to connect a billion people by 2030

“As partners we step up the ability of collaborating because we can extend support such as access to funding, support them to acquire devices,” said Mzwanele Memani, the acting chief director responsible for localisation and value chain analysis at the Department of Small Business Development. 

“But if they’re not able to connect and transact, it becomes a futile exercise. The issue of infrastructure is a big elephant in the room. I’m aware of businesses that have relocated from rural areas, because of struggles with energy or telecommunications, and migrated to urban centres just to access the network.” 

Lastly, control over data and the algorithms that process it has become a new form of economic power. Rakabe said data sovereignty should be seen not just as a government mandate but as “a critical part of the organisation itself”. 

Read more: Why SA companies are repatriating their data

Without data localisation, South Africa cannot invest in its own data centres, he said, which require specialised instrumentation — a missed opportunity for local industrial development. The report notes that limited regulation of cross-border data flows also risks handing economic control to foreign platforms.

CART-ing ahead

The report urges South Africa to adopt a “CART” framework, which are four actions to steer the next phase of e-commerce growth.

The first step, “Connect”, targets digital inclusion through infrastructure, mobile payment systems and digital skills programmes. “Accelerate” aims to boost SMME participation through township logistics hubs and digital marketplaces. 

“Regulate” calls for a dedicated e-commerce unit inside the Department of Trade, Industry and Competition to streamline oversight and enforce local compliance. Finally, “Trade” urges South Africa to use the African Continental Free Trade Area (AfCFTA) to become a regional e-commerce hub.

Rakabe emphasised the need for innovation-friendly policy. One idea gaining traction is the use of “regulatory sandboxes”, which are controlled environments to test new rules before rewriting the law. 

Cannibalisation and the cost of inaction 

If you thought e-commerce killed jobs, you missed the memo, according to Tempest. He says the industry has actively shifted jobs, trading retail storefronts for the operational demands of logistics and vast delivery networks.

Rakabe warned that much of today’s online growth is “cannibalising” existing retail sales rather than generating new economic activity. 

“Without local content rules or domestic platform incentives, e-commerce risks displacing, rather than building, domestic value chains,” the report reads. 

Read more: SA’s R130bn e-commerce boom sparks fears of retail sector job losses

“Digital transformation is not a solo act. It takes all of us,” said Mahanyele-Dabengwa. Similarly, Kathrada pressed for a clear national direction: “We need to know what it is we’re trying to achieve... because only then can we unlock opportunities for small businesses.”

South Africa has the mature ecosystem, the ambitious entrepreneurs, and the sheer market size. If regulators and stakeholders can stop quarreling over who owns which tiny cog and agree on setting the correct time for the nation’s e-commerce future, they can prevent international competitors from scoffing up the entire lunch. DM