Computer hardware distributors under pressure from volatile rand

TheMightyQuin said:
Ag kak, man. I dealt with these guys for many, many years.

They all buy forward cover and base their prices on that. The ROE has zero NEGATIVE impact on them...
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Beat me to it. It's very rare the ROE isn't passed on to the dealers however the distribution side usually is pretty unaffected until the cover ends and the new negotiated cover kicks in.
 
TheMightyQuin said:
Ag kak, man. I dealt with these guys for many, many years.

They all buy forward cover and base their prices on that. The ROE has zero NEGATIVE impact on them...
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Just a question, does forward cover include customs roe. From what I understand forward cover is a contract between the bank and purchaser but when the items come in at that future date, surely sars will rate the item at the current exchange rate?

Essentially, to what extent does the foward cover apply.
 
acidrain said:
An agreement made with the bank for a gaurenteed rate at a future date.
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So if the rate today is R18.00 and I buy forward cover - they'll probably lock the guarantee at R18.50 or something, as I'm sure there is a premium?
 
Honestly I don't know the indepth details of how it works. Just know briefly what google said.

You probably also have to have significant buying power for the banks to consider such an agreement.
 
acidrain said:
Honestly I don't know the indepth details of how it works
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So there is a premium and it increases the further into the 'future' you buy for, as there is more risk

Just looking todays :

1717743250736.png
 
But here's my question :

Order #1 placed today with forward cover locked @ R18.50
Order #2 placed a week later with forward cover locked @ R18.70
Order #3 placed a week later with forward cover locked @ R19.00

Each order (with forward cover) has a different rate that the items land at - so what am I missing that ROE has no impact if order #1 and order #3 have a 3% difference due to RoE?
 
Dolby said:
But here's my question :

Order #1 placed today with forward cover locked @ R18.50
Order #2 placed a week later with forward cover locked @ R18.70
Order #3 placed a week later with forward cover locked @ R19.00

Each order (with forward cover) has a different rate that the items land at - so what am I missing that ROE has no impact if order #1 and order #3 have a 3% difference due to RoE?
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TheMightyQuin said:
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Click to expand...
Thnk you .

Below :
Dolby said:
Order #1 placed today with forward cover locked @ R18.50
Order #2 placed a week later with forward cover locked @ R18.70
Order #3 placed a week later with forward cover locked @ R19.00

Each order (with forward cover) has a different rate that the items land at - so what am I missing that ROE has no impact if order #1 and order #3 have a 3% difference due to RoE?
Click to expand...
 
Dolby said:
Thnk you .

Below :
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As per your example:

I think that is overly simplified if I may say so. They usually buy quarterly or 6 months in advance and cover for the worse case scenario allowed.

They never lose money, believe me...otherwise forward cover will be pointless.
 
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Dolby said:
Thnk you .

Below :
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My limited understanding, the accountants can confirm:

1. Companies will forecast their foreign purchases for a specific period. They will enter into an agreement to buy $ at a specific rate on a specific date.

2. They also arrange payment terms with their suppliers. I.e. try to match payment dates with 1. above to try to remove the volatility in the exchange rate.
 
Shame. I would encourage all small to medium businesses to just buy from Takealot. Cheaper, better after-sales service, and no-nonsense returns.
 
rh1 said:
My limited understanding, the accountants can confirm:

1. Companies will forecast their foreign purchases for a specific period. They will enter into an agreement to buy $ at a specific rate on a specific date.

2. They also arrange payment terms with their suppliers. I.e. try to match payment dates with 1. above to try to remove the volatility in the exchange rate.
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Mostly this yes.

I have however during COVID had scenarios with a certain distributor ( won't name any names, but their name starts with an M and ends with a K) where the exchange rate did come into play during big deals.

Or at least they tried to make it an issue but I told them to f-off. When you buy 4 000 cellphones for a client, quotes and PO's are normally cast in stone.

Also with these big deals with stock that has to be bought in specifically, you normally enter into what's called a PPC ( Partner Price Concession) directly with the manufacturer. This allows for better pricing and safer ROE margins.

So it is a varied scenario indeed.

The "article" is rather simplified tbh: the KB's and MB's etc that these distro's carry in stock, become more expensive overnight as the ROE worsens, regardless what they bought it at. They however do not become cheaper when the ROE improves...it's all a big "scam".
 
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