In imports, timing is everything

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Dr Greg Cline | Head | Corporate Accounts | Investec Import Solutions | mail me |


The state of imports in South Africa is one that fluctuates depending on how the economy is performing.

Recently, imports to South Africa declined 1.6 % month-over-month to R87.4 billion in April 2018, mostly due to lower purchases of base metals (-17%); textiles (-17%); chemical products (-4%) and vehicles and transport equipment (-4%). In contrast, imports increased for mineral products (9%).

When is right?

Common sense indicates that when the currency is stronger, it becomes cheaper to import. But, if we consider that the trade market changes constantly and that there are a number of factors that affect the sector – beyond currency fluctuations, is there really a right time to import?

The short answer is no – as its very rare that all market considerations are favourable. However, understanding the market means that best suited market conditions can be understood and aligned to. Attention needs to be paid to the complex process involved for importing.

SARS defines approximately 90,000 product tariff codes that are strictly enforced on all imports. There is also a plethora of requirements for all shipments to the country. This means any organisation irrespective its size needs to ensure that every single detail on imported goods are accurate and as detailed as possible.

A classic example of this used by many is when importing a suit, the company needs to indicate the exact materials it is made of as different materials are charged at different duty rates. Getting such a basic step right is critical, and now even more so with the new Reporting and Conveyances of Goods Act (RCG) to ensure that there are no delays in the process and that more effective planning can be done around currency fluctuations, market trends, and consumer demand.

Service providers will be impacted in terms of the reporting structure required to comply. This is done to ensure that there is a more effective environment for reporting and, by the end of this year, a significantly more simplified declaration process – which should enable customs to better plan for incoming and outgoing shipments – which means less delays which has an impact on cost and of course time to market.


PODCAST

An interview with Dr Greg Cline, Head Corporate Accounts, Investec Import Solutions, and Dr Ivor Blumenthal, CEO, ArkKonsult, discussing timing in relation to importing. Common sense indicates that when the currency is stronger, it becomes cheaper to import. But, if we consider that the trade market changes constantly and that there are a number of factors that affect the sector – beyond currency fluctuations, is there really a right time to import?

CLICK HERE TO READ THE ARTICLE |


Regional considerations

Additionally, there is also South Africa’s biggest trading partners to consider.

These include China, the United States, Germany, Japan, and France. Closer to home there is Botswana and Namibia. Seasonal impacts around the availability of certain products and services (clothing, food, and even medicine) should be considered for companies specialising in any of these fields.

But beyond the goods being imported, the company should work with a specialist partner capable of providing it with the working capital required to facilitate a smoother process – season availability or not. This enables the financing of not only the goods but also the import forwarding and clearing costs, so the company can remain focused on its core business. Managed debt can be one of the most cost-effective forms of financing available to a growing business. A company that is stable and well-established, and has both assets to borrow against and the cash flow to service the loans, can utilise this form of debt strategically.

What’s more, one of the pitfalls working with such a partner will avoid is when those inexperienced in the market wait for a better freight rate quote only to see existing ones expiring due to fluctuating market conditions. Additionally, working with an experienced partner with sizable market presence allows for more economical insurance cover, with no option excess policies.

VAT exercise

Another challenge around timing is ensuring that the import documentation, invoice, and payment of Customs VAT fall within the same VAT period in which the business wants to claim the necessary deductions.

There is nothing so frustrating (and costly) as factoring all the timing elements around importing goods only to get unstuck by something as rudimentary as this.

With margins becoming thinner, there is more awareness around cost containment. By embracing technology, different financing models, and working with importers as partners, companies may not always be able to find the exact right time to import, but they certainly can mitigate a lot of the risks associated with the uncertainties that exist in the market and maximise their return on investment.


 

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