By Harry Scherzer, CEO, Future Forex 

The automotive sector plays a critical role in South Africa’s economy. In fact, it’s estimated that the sector as a whole comprises 4.3% of the country’s total GDP. The vast majority of that comes from large-scale vehicle manufacturing (for local and export markets) and retail. There are, however, also a great many smaller players, such as retailers that cater to mechanics and hobbyists, and performance tuning companies. 

All of these businesses require automotive parts, many of which have to be imported. According to a report released by the Automotive Industry Export Council (AIEC) earlier this year, there was a 15.9% increase in the import of automotive replacement parts in 2022, taking the total up to R79.19 billion. 

Ensuring that those imports come through when they’re needed is far from a simple task either. There are, for example, the many moving parts that make up any industry’s global supply chain. And as we’ve seen over the past couple of years, those supply chains can quickly become disrupted. One of the more underrated things they have to deal with, however, is the international payments needed to bring vehicles or parts to South Africa. 

Handled incorrectly, those payments can cost far more than necessary and quickly become a weak link for any import business. With the right international payment partner, however, they can be made seamlessly and without any hassle on the business owner’s part. 

The trouble with banks and traditional forex 

The obvious temptation for most automotive import businesses would be to use the same bank as they do for their day-to-day transactions. That’s understandable too. The relevant people in those businesses are most likely familiar with the bank’s online interfaces and, if it offers international payment services, surely that makes it the best choice of provider. 

Unfortunately, that’s rarely the case. Banks often fall short in several areas when it comes to international payments, from customer service to cost savings. 

That’s especially true for small importers, who are typically seen as little more than a number. What that means is that if there are any unforeseen issues with a payment, the business will have to go through the same customer service channels we all do. This typically involves myriad phone calls, emails, and social media posts. Those issues are bad enough when it’s your own money on the line but they can be potentially devastating for a business. 

No matter how good your business is at what it does, customers will go elsewhere if you can’t give them the rims or performance suspension they want because you’ve encountered a payment issue. It’s also worth bearing in mind that banks likely won’t be able to help with issues like SARS and Reserve Bank compliance or provide much protection from fluctuations in the rand. The latter can be especially problematic as it means an order can end up costing much more than you were budgeting and eating into your profit margins. 

Another major issue that businesses face when it comes to using banks for international payments is cost. That’s because banks are seldom transparent when it comes to the fees they charge for international payments. In the most egregious cases, businesses can end up paying tens of thousands of rands more on each payment than it should.  

Ultimately then, any automotive import business that uses a bank for its international payment needs is going to experience a lot of frustration. Moreover, it’ll have to either fork out for additional expertise or hope that people within the business can become forex experts themselves. And let’s be honest; no self-respecting petrolhead gets into the business with the hope of mastering international payments and currency exchanges. 

Finding the right forex partner 

Given how common those issues are with banks and other traditional providers, where should automotive import businesses turn for their forex needs? 

Ideally, they should look for an independent payment provider that grounds its offering in exceptional customer service, backed by deep industry knowledge. That means that if anything unforeseen happens with your payment, a dedicated account manager from the payment provider will be able to resolve it without passing any of the hassles back to you. This can only happen if the account manager has deep knowledge of the international payments space. 

If you’re a new player in the space, your payment provider should also be able to help you with advance payment notices (APNs). Again, this is something that automotive companies shouldn’t have to try and tackle alone, so that they can spend their time more efficiently. 

Finally, a good payment provider should provide some measure of risk management and hedging. This typically takes the form of forward exchange cover, which means that you’re guaranteed a future exchange at a rate set today. This provides at least some protection against rand uncertainty and makes financial planning easier. 

Focusing on what matters most

Ultimately, what all these offerings provide automotive importers is the chance to focus on their businesses. There are approximately 12 million vehicles on South African roads. The last thing any business catering to the drivers of those vehicles should have to worry about is an international payment going wrong.