The Role of FX Trading in Supporting South African NGOs with Global Operations

South African NGOs are doing important work in Johannesburg or in the backcountry in the region of Limpopo. These organisations fund their activities that may either be in support of education, public health, conservation, or disaster response, among others, which largely comes from foreign donors. If the donors are based in Europe, North America, and Asia then they will give donations to causes around the country. However, the value that these funds bring when it crosses the borders may vary with the fluctuations in the rand’s value as well as the overall trends in the global currency markets.

It is not merely a money-matters tilt of this currency exposure. To many NGOs, a sharp decline in the value of the rand can deplete an intended budget overnight requiring program modifications, or postponement in the delivery of vital services. On the other hand, a positive change may bring some breathing space. This is risky, particularly, in the case of organisations that have projects that span long-term or collaborate with international partners. To cushion such fluctuations, a few NGOs have begun to consider more vigorous financial planning which would involve a keener examination of exchange rates.

A good number of NGOs in South Africa have incorporated FX trading into this strategy. They may not be involved in trading as a source of revenue but, using currency tools, they ensure their operations are not subjected to volatility. With preset exchange rates or transfer limits, these organisations will know better what kind of funding will be devoted to their work. This stability is relevant when NGOs purchase school supplies, supply personnel and coordinate mass transportation in places where punctuality and precision are of primary importance.

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Teams that operate in the finance department of an NGO are starting to incorporate cross exchange information in their monthly planning meetings. They also work together with the banks or the financial service providers to gain insight into current trends and determine which tools they may use which meet their mission. This will aim at the maximisation of value of all donations, and each rand will go as far as possible to support vulnerable communities.

The international collaborations also involve the role of FX trading. NGOs usually deal with external contacts or suppliers, i.e. located outside of South Africa, and as such have to receive or pay money in other currencies. This can prove to be a confusing and expensive venture without a plan of action. In cases where the exchange rates differ drastically between signing an agreement and actual execution of the contract, financial reconciliation becomes a hard task. By using FX tools to stabilise such transactions, NGOs will keep their stakeholders informed and will establish closer international relations.

The curve in learning about currency management does not necessarily go smoothly particularly in the case of small NGOs who might not even be able to have full-time finance departments. However, with the increasing level of awareness, training and educational resources are being introduced. Specific workshops, webinars, and guides that relate to the non-profit sector are being used to assist organisations in knowing how to incorporate their FX strategies into their operations without undermining their main missions. It is about being practical and not speculating and applying all the tools that are available to make a difference.

At first sight, FX trading does not appear to be a natural fit for the nonprofit world. However, the actual truth is that it is increasingly helping to see to it that South Africa NGOs are also able to continue their operations without being brought down by fluctuations in currency value. The increased attention to risk management is ensuring that such organisations are ensuring their work is consistent, effective, and robust irrespective of the source of funds and the destination of funds.