IMPORTATION PRESENTATION Presented by: Charlene Strydom Foreign Exchange Representative
Importation issues Eskom has a policy to be fully hedged at all times such that the organisation does not incur any risk due to exposure to the foreign currency exchange rate movements for any imported goods or services. Tenderers are required to disclose the extent to which Eskom will be exposed to foreign currency exchange rate movement. The exchange rates to be used for the tender must be the exchange rate as published on the South African Reserve Bank website (www.resbank.co.za) on the date that the tender was advertised. 2
Importation issues Eskom has the following payment methods available to the tenderer for the imported component: Payment Method 1A Payment in foreign currency directly overseas to a nominated foreign beneficiary. Proof of importation will be required . 3
Importation issues Payment Method 1B Payment in foreign currency into a local CFC (Customer Foreign Currency ) bank account. Should this option be selected, Eskom requires that the following documentation be submitted to them: Copy of their Bankers application to the South African Reserve Bank. This document must clearly indicate whether the approval was sought purely for imported goods or for both goods and services. Copy of the official response from the South African Reserve Bank on SARB’s letterhead. NO copy and paste. The tenderer has to be the direct importer. Eskom requires proof of importation Eskom requires both a commercial (overseas) invoice and a local tax invoice to be submitted at time of payment request. The values on both invoices must match each other. Eskom will not pay profit in foreign currency . 4
Importation issues Payment Method 2 This is a ZAR based payment linked to exchange rate movement. Eskom will hedge the exposure and payment to the supplier will be done at the spot rate of exchange at which Eskom sells the forward cover in the market. Tenderers need to understand the risk they run if they select this option. Tenderers will have to provide a letter of stating that they will not take out forward cover. Proof of importation will be required . The tenderer has to be the direct importer 5
Importation issues Fixed ZAR contract Fixed in terms of exchange rate movement. CPA still allowed. Eskom will allow the tenderer to hedge the exchange rate movement by means of forward cover. However: Eskom will require that a simultaneous exercise is done to ensure that the exchange rates for the tenderer’s forward cover is market related. 6
Importation issues Eskom does not permit the use of Rate Adjustment in a CPA formula Foreign indices can only be used to escalate imported cost compaonents Local indices can only be used to escalate local cost components Any Bonds and/or Guarantees must be through Eskom Treasury approved institutions 7
QUESTIONS ? 8
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