South Africans receiving or sending US dollars, euros or other currencies seldom question whether the fees they are charged or the rates they are quoted are reasonable.
Most accept the fees charged by the major banks without question. Some will try to negotiate lower fees, but most accept both the charges and the rate quoted, without understanding that there are much cheaper options.
BeztForex, which has been around for more than a decade and is staffed by seasoned experts from the financial sector, is disrupting the market by charging a flat transaction fee of R250, regardless of the size of the forex payment – and with no monthly or so-called ‘system fees’.
It has also bested the forex rates quoted by the bigger banks …
Forex transactions typically comprise two components: a Swift fee, and the forex margin or spread. When buying US dollar, for example, you may be quoted around R18.50 if you are sending dollars, and R18.20 if you are receiving. That spread is the profit made by the forex providers, mainly the largest banks, and it amounts to billions of rands each year in profit, with no credit risk.
Given the fact that roughly 80% of SA’s GDP involves forex transactions, that’s a huge bite of the economy going to the forex providers.
BeztForex has disrupted this cosy arrangement by offering wafer-thin margins.
“There is a misconception in the market that you have to stick with your bank for forex transactions because there are costs associated with shifting to another forex provider,” says BeztForex CEO Herman Bezuidenhout.
“This is not true. We are not a bank, but we are a licensed forex service provider, and all of our clients came to us because we are more competitive than the banks, and we offer services such as hedging and forward cover at extremely competitive rates. None of our clients have to change their banks because they transact through us.”
More ways than one
Beating the banks on price is only one part of what it does.
“We provide clients with access to readily available knowledge and information regarding these complex transactions, and we also help them to hedge and manage their forex exposure,” says Bezuidenhout.
“We do not require clients to sign contracts, nor will clients ever receive invoices from us. We are not forex consultants, we share in the forex margins with our partner banks, after clients receive a much better forex deal from our bank.
“We are here to assist clients with a seamless foreign exchange transaction experience, [which is] not subject to normal office hours or call centre staff.”
To get an understanding of the risks associated with forex exposure, take a look at the following graph of the rand against the US dollar over the last decade. Quite apart from the fact that the value of the rand has more than halved over this period, companies and private individuals have to contend with sometimes extreme volatility.
Some little-known facts about the forex market
Bezuidenhout points out that SA residents and companies receiving payment in US dollars are allowed to open foreign currency accounts in which to park their dollars. That hedges them against rand weakness, which has been a feature of the forex market for the last decade and saves them the costs and hassle of having to convert back to US dollars when importing or purchasing services abroad.
South Africans planning on financially emigrating or making use of their R10 million-a-year foreign investment allowance (FIA) have to navigate the South African Reserve Bank’s (Sarb’s) complex set of rules. FIA applications require tax clearance from the South African Revenue Service (Sars).
BeztForex provides tax clearance certificates and applications to Sarb for free, when transactions are facilitated by it.
The company also assists multinational companies with foreign nationals working and living in SA by opening bank accounts that allow them to transact globally.
There are a lot of South Africans working remotely and abroad for international companies who need to open a bank account to receive and send money, and BeztForex can assist with the opening of such bank accounts.
Recent changes to regulations around financial emigration have made it more difficult to shift funds abroad.
“Banks will only remit funds when the full financial emigration process has been completed, and South Africans who are living abroad, or who plan to, are under stricter surveillance than ever before,” says Bezuidenhout.
He adds that for Sars, South Africans who emigrated 20 years ago but who still have assets such as property in SA, are still regarded as South Africans temporally abroad – because they have not completed the financial emigration process.
Should they decide to sell the property in SA, or inherit money locally, they may not be able to receive the full proceeds in one go, as they are only able to remit R1 million per annum as part of their single discretionary allowance (SDA). For funds over R1 million they will need to either apply for the FIA allowance (up to R10 million per annum) or go through the full financial emigration process.
Forward cover for individuals
Another way BeztForex is disrupting the forex market for individuals is by allowing them to take out forward cover, which allows them to lock in a rate today – even though the forex is only needed several months hence.
“People who are investing abroad and need US dollars sometime in the future [up to 12 months] can lock in a rate today using forward cover, which most people assume is just for companies. Again, we are disrupting the market by making this available to individuals,” says Bezuidenhout.
“We’ve also got clients who emigrated years ago and are now returning to SA. One client was overseas for 20 years and built up a good property portfolio but is planning to return to SA with a view to purchasing a property sometime in the near future. We were able to lock in a forex rate to protect against any volatility in the British pound-rand exchange rate.
“We’re also able to do the same thing for a variety of other payment scenarios.”
Brought to you by BeztForex.
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