The foreign exchange market, or forex (FX) for short, is a decentralized marketplace that facilitates the buying and selling of different currencies. This takes place over the counter via the interbank market instead of on a centralized exchange. Without knowing it, you have probably already participated in the foreign exchange market by ordering imported shoes, or more obviously, buying foreign currency when on vacation.
WHAT IS THE PROCESS?
Two Capitec accounts are opened in the client’s name. There is always one ZAR and the other in the foreign denominated currency(ies) of the client’s choice. It takes approximately 2 business days to open any number of accounts. When converting currency, one currency is always sold while another is bought and vice versa. Vista performs these buying/selling forex transactions on behalf of our clients.
WHAT IS THE COST?
There is no cost to open and maintain Capitec bank accounts. Conversion cost is very transparent and is a pre-negotiated spread that is added to the buying or selling price of the currency in question. There is a fixed SWIFT transaction cost which is applicable to any foreign currency conversion.
WHAT ABOUT EXCHANGE CONTROL?
A SA resident with a green bar-coded ID book or smart ID with a SARS income tax number, can utilise their individual offshore allowances of up to R11 million (R10m foreign capital allowance and a R1m single discretionary allowance) per calendar year (1 January to 31 December). For amounts utilising the R10m foreign capital allowance the client must be over the age of 18 years and will need to apply for a foreign tax clearance from SARS.
WHAT ARE THE INTEREST RATES?
While a client will receive a competitive interest rate in their ZAR Capitec account, interest is currently not paid on foreign denominated currency accounts at Capitec. For this reason, SA Asset Management partnered with Interactive Brokers to provide clients with a US Dollar (USD) interest bearing account (minimums applicable).
Due to their low costs, excellent service and transparency, SA Asset Management makes use of Capitec Bank for our client’s forex needs.