The Consumer Goods and Services Ombudsman (CGSO) has warned that South Africa’s legislative framework around e-commerce is lacking and does not provide adequate protection for consumers.

In the organisation’s annual report, published this week, ombudsman Liaquat Soobrathi revealed that despite e-commerce only accounting for around 5% of South Africa’s total retail sales, most of the complaints the ombudsman received in the year to 31 March 2024 were e-commerce related.

The CGSO was established under the Consumer Protection Act and accredited by the minister of trade, industry & competition as the industry ombud of the consumer goods and services industry. It operates as a non-profit.

“The fact remains that there are clear gaps in the legislation when it comes to protecting online consumers, especially concerning online marketplaces that host high-volume third-party sellers who could be based anywhere in the world,” Soobrathi said in the report.

“Most consumers are unaware that they have contracted with a third-party seller until things go wrong. If the third-party seller subsequently ghosts the customer, very little redress is available.”

Soobrathi said this problem is not unique to South Africa, with many countries making efforts to amend legislation to enforce greater transparency regarding third-party sellers.

The 2023/2024 reporting period is the fourth consecutive year that e-commerce complaints dominated the ombudsman’s case workload. Most of the complaints received relate to items either not being delivered on time or not arriving at all. There is also a big volume of complaints related to defective goods and purchases that do not align with customer expectations.

Pitfalls

Soobrathi said South African vendors and third parties have clear guidelines in terms of the Electronic Communications and Transactions Act of 2002, but issues arise when the third-party vendors or the platforms they sell on are outside South Africa’s jurisdiction, where different time zones and language barriers also add complexity to the problem.

“For this reason, our main approach when it comes to e-commerce has been to create awareness of the pitfalls to be avoided and to ensure more online-savvy consumers. We place great emphasis on helping consumers identify rogue sites and poor practices,” Soobrathi said.

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He warned consumers to be aware of cheap imports, often advertised on social media, at “improbably low” prices, saying these should “raise several red flags” in their minds. He said the quality of these products is often substandard. Furthermore, additional charges for delivery, taxes and import duties are often hidden from the consumer until the goods arrive in the country. If these goods are defective, however, it is often difficult for the consumer to initiate a return.

The regulation of e-commerce in South Africa is as nascent as the industry itself. In June, the department of trade, industry & competition introduced new rules that will see international e-commerce retailers taxed for small packages at the same rates as the fees levied on large orders.

The move is an attempt to “level the playing field” for local retailers following criticism that Chinese firms Shein and Temu are “abusing” tax loopholes to gain an unfair advantage in the local market by allegedly breaking up large shipments into “small packages”.

Regulators in the US and UK are also introducing new laws around e-commerce – with taxation and consumer rights also coming into sharp focus in those jurisdictions. South Africa is a laggard among emerging markets, where e-commerce averages around 15% of total retail. This suggests there is room for growth in the local market, but consumers must be wise about choosing platforms that are accountable to them and the laws of South Africa as the industry advances.

“Ultimately, consumer protection is a two-way street: the law provides the framework, including the provision of an ombudsman to mediate between suppliers and consumers, but consumers must arm themselves with information to make responsible, informed choices,” said Soobrathi. – © 2024 NewsCentral Media