All South African exporters face this risk on a daily basis, as our South African Rand strengthens or falls against other major currencies, it is difficult for South African exporters to predict the movement of the Rand, thus resulting in speculation on the part of the exporter on the likely direction of movement of the currency (i.e. up or down). Ultimately one party will benefit over the other. The easiest way to overcome this is to quote in one’s own currency namely the SA Rand. However, the exporter still runs the risk that the currency will weaken and thus resulting in the benefit of a weaker exchange rate being passed onto the importer and not benefiting the exporter.
The exporter must approach the Foreign Exchange division of his bank prior to quoting any prices internationally, in order to obtain advice and the movement of the South African Rand.
A strategy that the exporter could follow in order to protect against the influence of exchange rate movements is to hedge against such movements through the purchase of forward exchange rate contracts.