Discusses the most common methods of payment, such as open account, letter of credit, cash in advance, documentary collections, factoring, etc. Includes credit-rating and collection agencies in this country. Includes primary credit or charge cards used in this country.
Last Published: 7/14/2019

 

South African importers utilize most of the standard payment methods available in international commerce.  The most commonly used are:
  • Cash in Advance:  the buyer pays for goods in advance and transfers money from the buyer’s account to the seller’s account in the currency of the Pro Forma Invoice. (Lowest Risk).
  • Letters of Credit (LC), also known as Commercial or Documentary Credits:  this form protects both buyer and seller against non-payment.  Commercial Banks issue LCs on behalf of an importer in favor of a beneficiary, typically the exporter.
  • Irrevocable LC:  if the exporter is concerned about the reliability of the importer only, he/she should use an irrevocable LC.
  • Confirmed irrevocable credit:  if the exporter is concerned about the standing of the issuing bank and/or the standing of the importer's country, he/she should use a confirmed irrevocable credit.
Other methods of payment include the following:
  • Bank Collections and Bills of Exchange: whereby the exporter initiates, through the banking system, the collection of money owed to him by the buyer (Medium Risk).
  • Open Account:  the seller relies entirely on the buyer/importer to make payment as stipulated under a contract of sale, usually after selling a part of the consignment (High Risk).
  • Sales on Consignment: the seller sends goods prior to payment but retains ownership of the goods until the buyer sells the goods to the end-user. The buyer is then expected to pay for the goods (Highest Risk).

For most payment processes, transactions use two reliable payment methods:   Telegraphic Transfers (TT’s) or S.W.I.F.T. (Society for Worldwide Interbank Financial Telecommunication).
In South Africa, all credits issued are subject to exchange control regulations, and in limited cases, a South African import permit. South African exchange control regulations stipulate that payment of imports may be affected only by authorized banks against submission by their customers of documentary proof that the goods were imported into South Africa as evidenced by invoices and shipping documents stamped by South African Customs. An exception is, inter alia, when South African banks have opened documentary import letters of credit in favor of foreign exporters. In those cases, banks may affect payment against presentation by the exporter of invoices and shipping documents to the foreign negotiating bank before the goods have arrived in South Africa (but after they have left the United States). If credit is available, payment will take place upon presentation of documents.

American exporters should offer quotations based on the f.o.b. value at the port of export.  As a rule, such quotations should also include a statement of the actual charges for freight and insurance plus any additional charges to the port of delivery. Quotations are usually in terms of the currency of the country of origin.

The terms of payment for imported goods vary according to the type of buyer and the buyer's access to capital. Large organizations such as the government or mining companies tend to transact business on a sight-draft basis, while small companies tend to operate on documents against acceptable terms.

Common payment terms are between 80 and 120 days after acceptance, but terms may vary between 30 and 180 days. For larger orders of capital equipment, longer terms are often required. It is advisable to ship on a letter of credit, sight letter of credit, or 30-day letter of credit basis that the importer can use as a negotiating instrument to expedite the payment transfer. The payment transfer can be affected within 24 to 48 hours after the importer presents a valid import permit and proper documents to his or her bank.

South Africa has adopted the Basel 3 framework. In May 2017, South Africa promulgated the Financial Intelligence Centre (FIC) law, bringing South Africa in line with international anti-money laundering requirements. https://www.fic.gov.za/Pages/Home.aspx

Prepared by our U.S. Embassies abroad. With its network of 108 offices across the United States and in more than 75 countries, the U.S. Commercial Service of the U.S. Department of Commerce utilizes its global presence and international marketing expertise to help U.S. companies sell their products and services worldwide. Locate the U.S. Commercial Service trade specialist in the U.S. nearest you by visiting http://export.gov/usoffices.