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South African exporters eager to expand in USD markets

"The exchange rate is what makes the industry challenging at the moment", says John Kowarsky of Afrex Trading, an exporter of agricultural products from South Africa. Over the years, the exchange rate of the USD has increased in value against the euro, which makes the air freight costs of South African products more expensive for the euro currency countries. For this reason, it becomes interesting for South African exporters to look for markets that are USD currency based, therefore offsetting the currency risk when selling in euro or sterling.

On the right: John Kowarsky at the IFTF in Vijfhuizen

In general, according to Kowarsky, the flower business in South Africa suffered for the last few months due to abnormal weather conditions. This affected the supply of many products, like wax flowers. Besides the difficult weather conditions encountered in SA, sales to the euro currency based countries were less profitable due to the weakening of the euro against the US dollar. "In the flower business, we have to deal with tight margins. So, if the cost of the air freight increases and becomes too high, the product becomes too expensive, which in turn affects the sales."

For this reason, Afrex is currently looking to expand to different markets, and into the dollar markets in particular. "We presently export flowers to the United Kingdom, Italy, Netherlands, Russia, Gulf States, Japan, China, Canada and the US. In these latter countries, where we sell in US dollars and pay the air freight in the same currency, the risk of currency fluctuations are minimal."

Why not sell direct?
"Unlike the Kenyan flower growers, most of the South African flower growers are not eager to export directly. Many of the farms are quite small and therefore it is not financially viable to export independently. We, as exporters, consolidate the orders and have the necessary facilities to provide a first class service to the growers that want to export their flowers worldwide", says Kowarsky.

Trump's election will affect trade?
Last Tuesday, Trump was elected as the new president of the USA. How will this affect, trade and Afrex Trading in particular? "Unfortunately one doesn't know how the markets will react. However, if the US economy will continue to strengthen and the USD strengthens even more under Trump against the euro, then the trend will continue and selling to the EU markets will become even less attractive to us."

For more information
Afrex Trading
Dave Kaplan
Email:[email protected]