April 2023

The demand for alternative energy products has skyrocketed in recent times because of the havoc that loadshedding has caused. We have seen an increase in enquiries for importing of products such as inverters, lithium-ion batteries, and solar panels among other products.

There are some key factors that need to be considered when importing of these products. We have a strong presence in this sector and will be happy to offer guidance and support should you have a need to import these products.

It’s during times like these that one needs to partner with an industry leading business such as Investec For Business that understands how to navigate tough times to support your business needs.

October 2022

Due to a slowdown in consumer demand for goods and considering that port congestion as a result is easing, we are starting to see shipping rates decrease. Shipping lines are also reducing rates even further to ensure they attract volumes in order to retain high vessel utilisation – as competition among shipping lines to attract volumes increases. In fact, in some cases we are witnessing a substantial cut in costs across a number of key routes – including the Far East trade which is seeing +- 50% reduction when compared to this time last year.

This is a substantial amount, especially if we consider that manufacturing input costs have increased, and such reductions can assist the cash flow of importers by partly off-setting higher input costs along with lower disbursement and finance fees.

The question then is, as an importer are you benefitting from these decreased rates? Is your import partner passing them on to you? If the answer is no – you are missing out.

Importers who don’t receive the full benefit of the rate reductions being passed on, don’t receive the reduced landed costs. And the knock-on effect will certainly be felt as this can not only affect competitiveness in the market, but also limit the ability to improve margins – and in this market, competitive pricing and margins are everything.

Our advice, look for a partner that constantly monitors the freight rates on your behalf to ensure that you always get the most competitive rate at time of shipping. One that has access to multiple shipping lines so is able to do a comprehensive rate analysis to ensure they always offer you the best rate and doesn’t delay passing the rate reduction benefit on.

If you are not getting that, isn’t it time you did? Let’s talk.

August 2022

While landed costs have always had to be a strong consideration for importing, with today’s Rand volatility, rising inflation and the knock-on effects of global and weather-based events, coupled with delays in production, availability of sailings, as well as customs and port constraints, is it even possible for an importer to determine landed costs accurately? And more over, given the complexities involved, is it possible to predict the landed cost of product in Rands? The answer is yes – with the right import partner.

It’s about understanding the cost elements one can control and how these are consolidated into a guaranteed landed price per unit so that purchasing decisions can be made in Rands to optimise or protect margins from the onset.

Foreign currency related costs are often determined on the day (spot price) or if hedged are often extended due to goods shipping on a date later than intended. Supplier cost of goods, freight, and origin charges are levied in foreign currency, and customs duties are calculated at a rate of exchange determined by SARS on the day goods are shipped. As a result, these costs are extremely vulnerable to market and that Rand volatility.

Whilst there are daily peaks and troughs in the Rand’s trading, a five-year historic view would illustrate the high volatility and overall depreciation in the ZAR / USD trade.  This Rand volatility can materially impact cost viability, especially on goods that carry high duty tariffs (e.g. up to 45% on apparel).  Working with a service provider that has the ability to hedge the duty component addresses this risk. Essentially this means being able to take a forward exchange contract on the customs duty component, so that the Rands cost of customs duty is locked in when the order is placed with the supplier.

An import partner, like Investec, that looks to both the funding and logistic elements of the import can leverage their forex and freight and clearing capabilities so that there are no below the line costs nor product cross-subsidisation.

Investec’s logistics system caters for line level forex management so that cash flows related to supplier payments and duty are built into the cost of the goods. This means that if 1000 widgets are imported in a container, it is possible to breakdown the supplier cost, freight and clearing charges, customs duty, marine insurance, transport and finance costs per widget. This enabling the receipt of stock at actual cost - GRV. All too often the complexities in reconciling multiple costs across multiple currencies leaves the importer in a position where assumed costs translate to guestimate cost inputs and inaccurate understanding of gross profits.

Import partners that get involved in the import process at order placement also have an advanced view of shipping volumes to enable for earlier negotiation of competitive freight rates and space on dependable shipping lines. Which, with the right understanding of how clients determine their pricing, can be costed on volume or value based on the cubic meters utilised, ensuring no averaging of costs or cross-subsidisation between product or price categories.

With the right partner on board, not only are they able to help importers simplify the inbound supply chain – managing the logistics process from order confirmation to shipping and delivery, and reducing the time spent on import administration and oversight - but can help importers better predict so that pricing is pegged correctly for them and the South African market. 

July 2022

Economic indicators for the second quarter of this year are showing that markets are coming under pressure and while a very hawkish tone was set with another 0.75bps increase to quell high and rising inflation, there is no doubt the impact is being felt all round – and very much in the trade and import sector. 

Inflation and interest rates affect imports primarily through their influence on the exchange rate and the knock-on effects to cash flow and margins can be substantial. This, coupled with elevated fuel prices, eroding disposable incomenegatively impacting margins. 

In total, interest rates have risen by 2.00% in South Africa’s current interest rate cycle and the South African Reserve Bank is expected to continue increasing interest rates.   With added woes around lead times and shipping delays there’s no doubt that this market pressure for importers is expected to persist for the rest of 2022. 

Having a financial partner that is able to support you in softening the impact of rising interest rates, navigate the uncertainty in lead times and protect margins against a weaker Rand is critical now more than ever. So, the question is – are you prepared?

June 2022

Shocks have not been in short supply so far in 2022. Escalating inflation and increasing interest rate fears, coupled with geopolitical instability amongst other factors, continue to cloud the broader outlook. And while total trade flows are now comfortably above pre-pandemic levels, there is no doubt the impact and pressures across specific goods, services and trade continue to be felt across the supply chain.

Port congestion remains a common theme across all trade routes and the impacts continue to be being felt in the form of extended shipping lead times when compared to published schedules, capacity constraints, trucking shortages, and transshipment delays.

The prolonged shutdown in China has also raised fears and while it is starting to open up, the pent-up delays following on from the Chinese New Year, knock-on productivity halts as well as increasing demand has meant that we are starting to see a subtle shift in routes and trade sourcing partners – a pattern that we are likely to continue to see.  

In fact, The European Chamber of Commerce in China’s survey across 372 companies in Shanghai in April found that 23% of companies are considering shifting their current or planned investments out of China with a high percentage indicating that as a result of Covid, China has become less attractive to invest in. 

We anticipate demand to steadily start shifting away from China to other Asian countries as well as a concerted drive to manufacture and source more products locally. In addition, there is greater focus on sustainability and ethical sourcing and manufacturing practices.

Diversifying sourcing based on needs means we are also likely to see a rise in non-traditional trade routes - which of course come with a host of new challenges, agreements and pain points that need to be ironed out – but ones that are worth it, if it means easing supply chain pressures and mitigating risks.

What does become apparent however, is the need for an end-to-end finance and import partner who not only has an expanded network and is well positioned to offer a variety of options to meet changing requirements, but one that is also able to offer the same level of service that businesses have become accustomed to on traditional routes. A partner that understands all global trade routes – no matter which one suits your needs. 

April 2022

It’s no secret that the supply chain industry continues to witness immense volatility. Global pandemic knock-on effects, coupled with current strict lockdown regulations across China has resulted in trucking shortages, manufacturing backlogs and erratic sailing schedules. Locally, the floods in Durban resulting in port closures as well as infrastructure damage, have added further headaches to an already stressed and stretched supply chain. And while focus is on navigating the now, businesses should also be looking ahead.

When manufacturing returns to full capacity, expect demand to ramp up and pressure on capacity, equipment and trucking to build up, which means planning for Q3 and Q4 now. So, the question is are your suppliers advising of longer production lead times? Are you factoring in longer lead times not only for production, but also shipping delays? And what about extended terms or temporary facility increase to accommodate pulling orders forward or paying deposits further in advance in order to secure production – are you covered?

It’s during times like these that one needs to partner with an industry leading business such as Investec For Business that understands how to navigate the rough seas and turbulent skies to support your business needs.

 So, ask yourself:

• Are you battling with longer manufacturing lead times?
• Are shipping delays causing cash flow constraints?
• Worried about low inventory levels?
• Are increasing supply chain costs hurting your bottom line?
• Do you require flexible import solutions to meet your in-store deadlines?
• Do you require tailored working capital solutions to navigate the ongoing supply chain disruptions?

If you answered yes and are looking to gain a competitive advantage during an unpredictable time, reach out to us and we will connect our human expertise with you to open up a world of possibilities.

March 2022

Fuel price and commodity increases have already started to impact supply chains costs and the expectation is that additional surcharges such as emergency energy surcharges and war risk surcharges will be implemented across all modes. Unfortunately, from April 2022 we are likely to see further price increases across the supply chain, including air and sea freight costs, origin and destination trucking costs and destination landside charges. This is also likely to be compounded down the line with an increase in manufacturing costs – with input and fuel costs rising.

The reality however is that we don’t know now what the exact impact will be and for how long these increased prices will last, but we do know that air and sea freight will remain constrained and disruptions can be expected across both air and sea freight.

Sea freight:

Given that several rail providers, have already suspended their services on the Asia-Europe corridor, this places additional pressure on sea and port capacity – with companies placing their goods on sea freight instead of rail.  As a result, current port congestion across the globe will remain a problem and lead times will continue to be unpredictable.

Air freight:

Several air carriers operating on the Asia-Europe route have either cancelled services or are now flying via alternative routes to avoid the no-fly zones over Russian airspace. Additionally, given the fact that some Russian airlines have been sanctioned, due to the conflict with Ukraine, this has decreased market capacity even further. As a result, this has meant longer transit times and increased pricing.

For South Africa, this will have a direct impact from a capacity and pricing perspective, especially around manufacturing and supply chain costs.

Given the reality, doesn’t it make sense to work with an institution that can not only support the capital to manage these longer leads times and increasing costs, but manage the import logistics on your behalf, in a market that is constantly changing and under constant pressure? Investec’s strategic network and global operations ensures we have multiple options at our disposal to offer flexible solutions in how we move cargo. More flexibility and increased visibility mean less risk which not only can reduce costs, but also provides for better monitoring and control – something that is very much needed in the current business landscape.

February 2022

While container availability has and continues to improve since last year, capacity constraints, specifically in sea freight, are predicted to continue. Due to the pandemic, rolling lockdown restrictions, port congestion and changes in demand, many shipping lines deployed additional capacity to trades where demand was growing and phased out capacity on certain routes such as South Africa. We are now seeing an overflow of demand and overbookings, which coupled with blank sailing schedules, congestion and backlogs across in main transshipment hubs and main ports – has resulted in what can only be described as a capacity crunch.

As a result, many importers are asking themselves how can they navigate these uncertain waters and get their cargo delivered on time? 

One thing is for certain, you cannot afford to fall into a routine and ignore the fact the one needs to adapt your supply chain when it comes to the latest market developments. Detailed planning and forecasting has always been fundamental, but now it is critical. Working with a specialist partner such as Investec allows you to not only plan better but also navigate better with an efficient end-to-end logistics and working capital solution. What’s more, Investec has a sizeable market presence and access to a strong global network, which means you get access to multiple shipping lines and flexible options, which can go a long way to ensuring your shipments move on time. 

November 2021

An unforeseen cascade of events caused by the pandemic, coupled with the upswing of trade and increase in post-pandemic demand particularly for intra-Asia and Asia-US routes, has us facing a worldwide ocean freight container shortage crisis. Moreover, it has led to drastic inflation in shipping and container prices, not to mention increased delay times.

So where did all the containers go?

The pairing of lockdown regulations alongside other factors such as the halt of global trade meant that a significant number of containers found themselves in inland depots while others have been stacking up at cargo ports. And while trade has resumed, the backlog has continued. This challenge has caused up to a threefold increase in container shipping rates, some delay in shipments or in more drastic cases, an inability to place an order for new shipments. As a result, importers need to become smart in how they plan and book their shipments, as well as how they manage their procurement finance, especially as capacity remains constrained.

Despite the challenging import environment, we have, in general, managed to consistently secure space through our extensive global network. With our expanded international partnerships, we have gained access to additional capacity which allows us to strengthen our service offerings. Additionally, we also have various alternative sea and air freight options at our disposal, including access to space on charter flights and trade financing options to ensure we are not only able to secure space at very competitive rates, but can also continue offering flexible import solutions. 

October 2021

There are mixed opinions in the market on when the existing pressures on global supply chains will start easing and whether we will see a noticeable improvement in efficiencies – but one thing is clear, the costs are rising.

Severe bottlenecks, regional trucking and equipment shortages, routing amendments as well as port omissions and congestion, coupled with classic supply vs demand anecdote means rates remain elevated and further upward adjustments will be made with rising fuel prices. So how can you get a grip on rising import costs?

The process of effective import management and the associated finance component within the overall supply chain cycle is critical now more than ever. Extensive pre-planning can help mitigate increasing and unnecessary costs but for any business who truly wants to manage the cost of financing imports, working with a reputable fully integrated end-to-end import transaction solution partner such as Investec, provides greater visibility, improved efficiencies, and the ability to predetermine total landed costs before committing to an order, which can reduce costs. Coupled with access to competitive rates and potential cost-saving strategies and the right-size lending solution and credit facility, Investec capital solutions can help alleviate pressure on the business – meaning costs can be managed, working capital optimised and the right funding deployed at optimal points in the business cycle for better turnover.