How the Middle East crisis creates opportunity
Global financial markets are in chaos following the outbreak of hostilities in the Middle East. Oil shot above $100 a barrel in early trade on Monday before retreating to $95/bbl as traffic through the Strait of Hormuz – which accounts for a quarter of seaborne oil trade – slowed to a trickle.
The ZAR lost nearly 6% against the USD over the last week, trading at a low of R16.84 on Monday before recovering slightly.
By some accounts, about $6 trillion has been wiped off global stock market values since the start of hostilities. Gold is back above $5 100 an ounce – a sign that investors are skittish and uncertain what the future holds.
“There are always opportunities is crisis,” says Faadil Moti, CEO of 80eight, a licensed treasury outsourced company (TOC) and financial services provider (FSP).
“The ZAR has weakened significantly since the start of the Middle East crisis, but the mass sell-off in global financial markets has made assets cheaper. That’s a huge opportunity. The sell-off may deepen, but astute investors are starting to build up positions at these prices.”
On top of this comes some good news contained in the latest Budget.
Government has announced it wants to double the Special Discretionary Allowance (SDA) from R1 million to R2 million a year.
“We are awaiting clarity and regulatory certainty on this, but – once approved – this means South Africans will be able to acquire roughly $120 000 a year instead of the previous $60 000,” says Moti. “And there’s a lot that can be done with this.”
This SDA is an allowance available to all South Africans that enables them to acquire foreign currency without South African Reserve Bank (Sarb) permission.
Every South African gets the R2 million SDA annually (once the regulations are published), plus an additional R10 million foreign investment allowance, provided they receive South African Revenue Service tax clearance. 80eight smooths this process by handling the approvals for you – at no cost.
The additional SDA is an excellent time to diversify into offshore assets like Amazon, Microsoft, Tesla stocks, or international exchange-traded funds (ETFs) unavailable locally. If you already hold offshore positions, consider topping up to capture ZAR gains.
“There are several good reasons why South Africans should take advantage of this SDA increase,” says Moti.
“Firstly, the exchange rate. Yes, it’s weakened over the last few days but it is still significantly in your favour compared to a year ago when it traded at above R18/$. That means you get more USD for your rands. But as we continually remind our customers, history is not in favour of the ZAR. Over the longer term it has depreciated massively against the USD. In other words, don’t count on the ZAR remaining strong forever.
“A second reason to buy USD is to hedge against future uncertainty. We’ve already seen the ZAR start to weaken somewhat against the USD, and the rand is famously volatile. That volatility has spiked in the last week. This is a good time to lock in rates and protect against future surprises.”
One of the risks is imported inflation – a reality that was slammed home in the last week with oil prices surging above $100/bbl. That will filter through to the consumer through higher prices in the coming weeks and months, making it harder for the Reserve Bank to achieve its inflation target of 3%. The USD offers some protection against this.
For importers, this is an opportunity build USD reserves or lock in good rates during periods of ZAR strength. “You can’t predict the future, so capitalise on opportunities when they appear, especially now,” says Moti.
80eight is offering customers zero SWIFT fees on international transfers for a period of three months. This is a significant saving, particularly for those doing regular transfers.
Another benefit of dealing through 80eight is it undercuts traditional bank fees on global transfers by up to 50%. Moti says the company does this by bulking transactions to get superior rates, backed by some fancy technology that automates much of the back office grunt work.
80eight clients are allocated forex experts – real humans who understand your business and forex needs, rather than impersonal chatbots or a daisy chain of call centre staff.
80eight offers SME financing to fuel trade and expansion, plus access to a network of over 30 000 trusted international businesses across the Middle East, Asia, and Europe – opening new suppliers and markets.
By eliminating SWIFT fees for the next three months, slashing spreads permanently, providing financing, and connecting clients globally, 80eight makes cross-border payments and trade more affordable and accessible for South Africans. – Moneyweb