The entrepreneurial voyage is not for the faint of heart. Regardless of your industry, obstacles are faced daily, competition is fierce, and the landscape is everchanging, which collectively has an impact on your business.
The adage that, “we cannot direct the wind, but we can adjust our sails” holds a great deal of bearing for the South African landscape. Sources of systematic shocks are abundant, and it is therefore important to apply a clearly planned risk management framework.
A common risk that South African importers and exporters face is exchange rate risk. The volatility of the Rand is a great cause of concern to both importers and exporters, as their bottom line is directly impacted by the relative weakness (or occasional strength) of the Rand.
Exchange rate risk will unfortunately never be fully removed, but it is possible to smoothen its effects by entering a forward contract or by making use of a foreign currency account.
Entering a forward contract removes exchange rate fluctuations, as the amount of domestic currency needed for the purchase of foreign goods (denominated in foreign currency) is specified in advance and therefore hedged against any adverse price movements.
Forward contracts are traded over the counter through authorized intermediaries, which would typically charge a fee (or a mark-up on the exchange rate) for their services. From an exporter/importer’s perspective, it is important to gain an understanding as to how much you are being charged and how that rate is calculated.
Foreign currency accounts are another efficient route to instruct bulk payments or to mitigate foreign currency risk.
In addition to the above, Domisa offers:
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