South African exporters bullish about benefits of weak rand

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South African exporters bullish about benefits of weak rand

South African exporters are upbeat about current increased revenue due to the continued weakness of the rand, despite warnings over the long-term effects of higher costs.

Over the last 12 months the rand has weakened by 20% to ZAR 8.39 (US$1), although it is still not as low as the levels experienced in mid 2002.

Delecta Fruit financial director Marius du Plessis said on balance a weaker currency worked in the industry's favor.

"As fruit exporters we love a weak rand. Obviously, we get our money in forex and exchange in good rates which means we can pay money back to the growers at better prices."

He said increased costs in logistics was not a problem as it made a small impact on revenue.

"The money we get back is much more and we can pay the higher costs for transport and freight."

Karpus Exports marketing manager Rema Mammen agreed, saying a weak currency helped exporters offer prices the market wants.

However, she said it was important for exporters to minimise their risk by getting forward cover on deals with the bank.

"You don't know how long this is going to last. The key thing is to get cover so that you know that the costing you are doing now will relate to your returns," she said.

"You have to make your deals at the right point with forward cover. Hedging needs to be done because you don't know where the currency is going to be in six to eight weeks' time."

Dole South Africa operations and commercial director Hannes Nieuwoudt, sounded a word of caution about over reliance on exchange rates.

"It’s a double edged sword in terms of input costs, inflation is driven up by a weaker rand. The net effect is really not something to write home about."

Citrus Growers Association (CGA) chief executive Justin Chadwick, said the increasing importance of the dollar meant a weak rand was a concern.

"With most export costs, in particular shipping, being priced in US dollars the movement of the rand does influence costs – with a weakening rand having an influence on cost levels. This impact is felt over a longer period of time, whereas the increased returns due to rand weakness result in almost immediate increases in returns."

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