This time last year it cost R10,75 to buy US$1. It now costs R11,66. That is almost 6% more. If you had merely placed your money into a US$ bank account, even without interest, you would have earned 6%. That’s better than using current money market rates here in SA. Imagine if that money had also been invested?
A year earlier, i.e. 28 Feb 2013, the price was R9,03, a growth of 19% in one year, and a combined growth of 29% in two years.
I’m no investment adviser, just a small business person, but on this backdrop it is likely to cost R12,50 to buy US$1 by the end of this year. If I’m right, that will be another 8% – and only for 10 months.
If we look at the British pound, in Feb 2013 each £1 cost R13,69. At today’s date it will cost you R18,01, a massive 31% growth. Can I dare to say that it will be over R20 by the end of the year?
I’ve already said that I’m no investment adviser so why, might you ask, have I made reference to these statistics? The answer is simple. If you had opened another business in the UK in 2013 and retained your profit in your UK company, your profit after tax, even if left in the bank, would have grown by over 30% in Rand terms. Moreover, this income would be in addition to the income that you have made here in your regular business.
So will this devaluation of the Rand continue? I have no idea – your guess is as good as mine but hedging against this possible devaluation is not a bad idea, especially if this results in additional sales. So how can this be done?
Opening an additional business in the UK will cost you a lot less than you think. You will have to budget about R10,000 each month to cover the cost of your office rent, telephones and reception staff. All other costs are likely to be variable based on sales unless you want to employ accountants, bookkeepers and the like, but in all probability you will handle that side of the business right here in SA. You don’t even need to go to the UK unless you want to.
If you are keen on expanding your business into the UK, take a look at our website, you’ll be surprised at what is on offer. Why not sign-up to our newsletter and keep up to date.