Importers of products into South Africa are governed by the Exchange control regulations of the South Africa Reserve Bank. Under certain circumstances, importers may import products into South Africa without holding an importers license which are up to certain maximums.

You are entitled to import up to 3 shipments of products and make payment for these shipments without an importers permit if the transaction value is less than R20 000 up to a maximum of 3 times per annum. Once you exceed these maximums it is important to apply for an importers permit from SARS to avoid having your shipments held by the Port authorities and attracting penalties. In some cases where these maximum allowances are exceeded, the Port authorities may return your goods to the exporter and it would very much depend on your relationship with the exporter as to whether or not you would receive a credit for returned goods.

I am a small business which does not need to register as a VAT vendor because my turnover is below the threshold, do I still need to register for an import permit?

This question is often asked by small businesses and the simple answer is that in order to import for profit, you need to be registered as an importer and have an import permit from SARS. In order to obtain an import permit you are required to be a VAT vendor as you cannot apply for an import permit without a VAT number.

An application for an import permit takes approximately 14 days from date of filing your papers.

The following declaration which all private importers (importing in your name) explains the parameters and is required to be signed by a private importer.

In respect of private importers, only 3 consignments, imported for non-commercial purposes with a value not exceeding ZAR20 000.00 per consignment is permitted to be imported per calendar year without the importer having to register with customs. A signed declaration to this effect is required of the importer to substantiate this claim. Should the importer exceed any one of these thresholds, the importer is compelled to make an application to the Dept. of Customs & Excise for a customs code number failing which customs reserves the right to impose a penalty for the contravention of the Act and detain any current and future imports until such registration requirements are complied with.

What is the most cost effective way for me to pay for my imports?

Most small business pay for their imports by using a credit card and are charged a premium for the foreign exchange transaction by the bank handling the transaction. It may be a good idea for you to consider opening a CFC account with your bank.

This is a very risky exercise where the holding costs of the currency are greater than the interest earned. Holding interest can be as high as 10 or 11% with interest earned as low as 2% which leaves a large gap that needs to be filled in the traded price differential that will need to made up before any profits on the forex held in the CFC account can be made.

Companies that make use of a CFC account and transact regularly are able to get exemption from the SA Reserve bank for the submission of BoP (Balance of Payments) forms for each transaction. Exemption from providing a BoP form needs to be applied for through an authorised financial Institution or licensed forex broker.

Overdrawn CFC accounts can be used to attract very low interest rates on overdrafts but the security must be available in a local account and will be determined by your local bank.

It is recommended that importers and exporters who transact regularly in foreign currency talk to their banks about the facilities available and the requirements for operating a CFC account. If you use a Forex broker, contact them to discuss the merits of holding a CFC account.

ADX

The strength of a trend on any forex pair is indicated as the “Average Directional Index” and indicates the which direction the pair is trending towards.

Ask

Sometimes shown as the “Offer” which indicates the price other trade makers are offering their currency and the price you will need to pay for it.

Bank Rate

In South Africa you will know it as the “repo rate” which represents the percentage interest at which that country’s Central Bank lend money to their commercial banks.

Bid

The bid price is the price that other trade makers are prepared to pay for a currency and the price you would sell for.

Broker

A broker sits between traders and the institutions much like an insurance broker and trades on your behalf.

Cable

The most traded pair of currencies is the GBP/USD pair which forex traders have given the name “cable”.

Carry Trade

Every so often the Central Banks review their bank rate and a carry trade is a position that is left open overnight specifically to take advantage of the difference in the interest rate and hopefully make a profit.

CCI

The “commodity channel index” is used by brokers to find overbought or oversold positions in the market and is a technical indicator.

CFD

A “contract for difference” allows traders to buy or sell without actually paying for the trades and is the instrument where gearing is taken advantage of , most used by speculators.

CPI

The consumer price index is announced from time to time and is a statistical measure of inflation. The price of a pre determined basket of goods is measured and the percentage increase or decrease is show as the consumer price index.

EA

Trading currencies with an “Expert Adviser” allows traders to manage their positions automatically. It is a software program that traders use to automate buy/sell positions.

ECB

The “European Central Bank” that regulates the financial system of the European Union.

Fed

The Federal Reserve is the regulator of the Unites States of America’s financial systems.

Flat

When all positions are closed, this state is referred to as “flat”

Fundamental Analysis

An analysis of the forex markets based on no analytical tools but on the basis of news reports and economic indicators from the various central banks.

Gap

In the Forex markets, the “gap” occurs on weekends and is the difference between the closing price on Friday and the opening price on Monday.

GDP

An annualsied calculation of the total market value of goods and services produced in a country in any given year.

GTC

Sometimes referred to as an open order, a “Good till cancelled’ order would have a fixed price and remains open until executed or cancelled.

Hedging

A defensive position used to lower risk where a position is taken in the opposite direction

Jobber

These are traders who trade small positions in the very short term and rarely leave any positions overnight, sometimes known as day traders.

Leading Indicators

These indicators are used to forecast the trends in the economy going forward.

Limit Order

An order given to a broker to buy at a fixed price or a lesser price or to sell at a fixed price or a higher price.

Long

If you have taken a long position your primary currency in the pair is in the buying direction.

Lot

Normally indicated in units of 100 a lot refers to an exact amount of money or units.

Margin

The amount of cash needed in your account with the broker in order to execute any trades you wish to make and is intended as security for any potential losses.

Margin Account

The account that you hold with a broker firm that you need to deposit your margin into.

Margin Call

A margin call is made by a broker to a client to top up the funds in their margin account.

Market Order

A market order is an order to execute a buy or sell position at the prevailing market price.

Market Price

This is the current price at any given time indicated as the bid or offer price.

Momentum

This jargon indicates that a currency is moving in a particular direction, either up or down.

MA

Is the moving average which is a measure of the average price over time.

Offer

The offer price indicates what brokers are offering their currency to you at and the price you will buy at.

Order

An order is given to a broker to sell or buy at a particular price or within a price range.

PAMM

A Percentage Allocation Management Module is a system operated by the broker that allows an investor to invest with traders and allows traders to manage investors funds using the broker’s trading platform.

Pivot Point

The point at which a currency is likely to meet resistance to an upward or downward trend.

Pip

A PIP is the last digit or point in a rate eg ZAR/USD 5.4321, 1 would indicate the PIP.

Principal Value

The initial investment made.

Resistance

Resistance levels indicate levels of aggressive selling that could lead to a price increase.

Scalping

Scalping is charecterised by numerous small open positions for very short periods of time that are for short term trading profits.

Settled Position

A position is settled or closed when the transactions have all been executed.

Slippage

The difference between an order price and the execution price usually charecteristic of low liquidity.

Spread

A spread is the difference between ask and bid prices for a currency pair.

Standard Lot

Standard lots are in multiples of 100,000 units of the base currency which you are buying or selling in the pair.

Stop-Limit Order

An order given that indicates a lot can be purchased at a fixed price or lower price or a lot to be sold at a fixed price or higher.

Stop-Loss Order

Is an order placed to sell the moment the market has reached a certain price on the downside and is intended to limit losses should the market move in the direction not anticipated.

STP

The vast majority of all orders are processed as “straight through processing” which is an automated settlement process.

Support

Support levels indicate the price point at which there is likely to be aggressive buying indicating that the price may come down.

Swap

Swap is the overnight settlement of your positions where the rate difference between the 2 currencies in your pairs is settled, either on the upside or the downside.

Unrealized Profit/Loss

This is the profit or loss on all your open positions sometimes referred to as a floating profit/loss.

Useable Margin

The amount available in your margin account with which you are able to trade.

It is very expensive to simply allow the credit card companies to process your forex transactions with fees and costs in a number of cases way in excess of what you could exchange your foreign currency for in South Africa.

If you are not a regular traveller with a large sum of money that you exchange every year it is best to use one of the bureau de change available at the airport or most shopping centers. If on the other hand you are exchanging a fairly large sum of money, it would be best to visit a local bank or branch of your bank in South Africa to get a spot rate. This is likely to be a few points better than a burea de change.

Large sums of foreign currency can be exchanged by using a forex currency exchange financial service provider, which are commonly used by foreign Nationals who are making significant purchases like the purchase of property, vehicles or other expensive assets where a 1/2 point difference in the exhange rate can make a sizeable difference to the capital amount.

In essence, for travellers and visitors who are not exchanging klarge sums of foreign exchange, the local banks or bureau de change will offer acceptable rates of exchange. Always be aware that using main street banks or forex currency exchange representatives that are certified financial services providers is recommended and never give out your banking details to anyone.

Making use of a professional forex currency business services company or the forex business services unit of your bank will save you a lot of time and money when it comes to making buy and sell decisions with a very low administration cost.

It is important for business critical transactions to make use of a forex currency business service provider to ensure that all of the documentation and approvals from the reserve bank are obtained and documents completed correctly. The last thing you need is for paperwork to be reurned as incorrectly completed or to discover that you have exceeded your transfer limits. The expert advice offered by registered financial services providers in the forex business is invaluable and allows you to rest assured that your transaction has been taken care of professionally, that you do not contravene any of the laws of South Africa, that the required approvals are attained and lastly that you have received the best possible currency exchange rate with an acceptable cost.

The currency service provider that you select will become an integral part of your business that will advise you on your forex strategy going forward, interview prospective business forex currency service providers to find out what their base costs are, find someone who you feel comfortable with and request information on their past trading history but most importantly, ask for references and call the references.

It is seldom a good idea to attempt dealing with foreign exchange transactions for your business on your own. The documentation needs to be 100%, the rate of exchange needs to be acceptable and if you frequently need the services of a business foreign exchange consultant, the ability to buy forward and secure a good rate is essential.