According to a research report produced by World Wide Worx in collaboration with Master Card, Peach Payments and Ask Africa, it was indicated that online retail spend in South Africa grew by 35% in 2024, against physical retail spend which grew by only 2,5% in the same calendar year. The report further indicates that, for certain fashion retailers, online sales now contribute up to 12% of turnover, with most retailers indicating double digit annual growth in online sales.

Many retailers use existing retail premises for the fulfillment of online orders. Unless properly defined, such online orders will fall outside of the retailers’ reported turnovers in respect of the leased premises in circumstances where turnover rental is paid.

Unless specific provision is made for turnover rental in a lease agreement, such rental cannot be raised. Turnover rental can only be raised to the extent allowed for in that lease agreement. This means that every claim for turnover rental be dependent on the provisions of the applicable lease agreement concluded between that landlord and that tenant.

Many landlords’ standard retail leases already contain appropriately worded turnover provisions to allow online sales to be included in turnover. Such clauses must make provision for at least the following:

  • All goods and services provided from the leased premises are to be included in the definition of turnover;
  • The origin of the instruction for the order, or the place where the order is to be executed, is to be irrelevant for purposes of calculating turnover. What is of importance is whether the product of service is in anyway whatsoever handled at the leased premises;
  • Specific provision ought to be made for electronic, email, internet, telephonic and other orders, irrespective of where delivery of such order is effected.

It may be expected that national retailers may push back against turnover provisions. The industry will not, however, be able to work together to attempt to force national retailers to accept turnover provisions, as the Competition Act, 89 of 1998 (“the Act”) prohibits any agreement between competitors which tend to prevent, lessen or distort competition.

If the industry is made aware of these concerns, however, and more members start requiring the inclusion of turnover provisions in the lease agreements, national retailers will be obliged to at least negotiate such terms.