Forward cover for imports

(Shutterstock)
(Shutterstock)
A Fin24 user, who imports goods, wants to know more about getting forward cover for imports. He writes:

I am an importer and pay in euros. I have forward cover for around 50% of my imports.

Would you advise me to take more forward cover? And what do you think will happen in the first quarter of 2014?

Craig MacFarlane of Bidvest responds:

That is really a tall order.

If you ask three different people, each will probably give you a different view on the rate movements.

It is difficult to forecast next week, let alone next year.

The rates hinge on a multitude of factors, which can affect them both  up and down.

My only comment would be to ask the Fin24 user the following question which he needs to answer for himself:

If the rand declines and your imports cost you more, can you afford to pass this increase on to your customers?

If they will accept a price increase then you can wait and see.

If you cannot pass on an increased price then you possibly need to take full cover now so you know what your landed cost will be and can price accordingly.

If you wait and the rand strengthens more, you can either pass the lower price on to your customers or you can increase your profit margins.

- Fin24

Do you have a pressing financial question? Post it on our Money Clinic section and we will get an expert to answer your query.

Disclaimer: Fin24 cannot be held liable for any investment decisions made based on the advice given by independent financial service providers.

Under the ECT Act and to the fullest extent possible under the applicable law, Fin24 disclaims all responsibility or liability for any damages whatsoever resulting from the use of this site in any manner.



ZAR/USD
17.02
(+0.83)
ZAR/GBP
21.35
(+0.78)
ZAR/EUR
19.21
(+0.72)
ZAR/AUD
11.82
(+0.75)
ZAR/JPY
0.16
(+0.78)
Gold
1801.90
(+0.47)
Silver
18.47
(+1.27)
Platinum
837.00
(+0.06)
Brent Crude
42.97
(-0.05)
Palladium
1933.00
(+1.33)
All Share
55594.52
(+0.63)
Top 40
51293.88
(+0.73)
Financial 15
10266.03
(+1.78)
Industrial 25
77593.42
(+0.96)
Resource 10
51995.14
(-0.04)
All JSE data delayed by at least 15 minutes morningstar logo
Company Snapshot
Voting Booth
Please select an option Oops! Something went wrong, please try again later.
Results
I'm not really directly affected
18% - 1760 votes
I am taking a hit, but should be able to recover in the next year
23% - 2316 votes
My finances have been devastated
35% - 3464 votes
It's still too early to know what the full effect will be
25% - 2488 votes
Vote