The one thing blocking the rand’s miraculous turnaround
South Africa’s rand has flipped the script and emerged much stronger than anyone expected in 2025.
But the country’s continued freight and port failures are a major blockage to getting the currency to trade at its fair value, even as all the other stars align.
The rand has been trading in a relatively stable range between R17.50 and R17.80, effectively shrugging off the market shock of the Trump tariffs that have hit global trade.
Many economists and analysts had expected the rand to buckle when it was hit with a 30% tariff on exports to the United States in August, but instead it showed remarkable resilience.
Some analysts, like Sanlam Investments portfolio manager James Turp, have called it a surprise turnaround for the currency, breaking a long-term and expected cycle.
“For years, the rand has followed a familiar cycle: long-term depreciation, brief recoveries, then renewed weakness,” Turp said.
“Inflation gaps and rising risk premia tied to weak fiscal metrics kept it on that path. Now the story looks different.”
The rand is now gaining against the US dollar, helped by global de-dollarisation and the South African Reserve Bank’s move to target 3% inflation.
With its credibility, CPI could get there sooner than expected, Turp said.
This has presented some upsides for South Africa: cheaper imports lowering fuel, tech, and input costs; relief on USD debt servicing, freeing capital; and a stronger rand signalling stability and boosting investor confidence.
However, it also comes with some risks: exports will likely experience strain with minerals and agriculture losing competitiveness, and jobs could come under pressure as export-driven sectors face softer demand.
This comes as South African exports and industries are already under pressure from the weak economy and external challenges with tariffs.
But even with the downside factored in, the rand has surprised on the stronger side, leaving many confounded.
South Africa builds its own roadblock
Despite the rand’s strength and reversal in sentiment, the currency is still far off from its PPP and fair values.
The Economist’s Big Mac Index indicates that the rand should be trading at a purchasing power parity (PPP) value of around R13/$, while economists generally see the rand’s fair value being around R16/$.
According to Investec Chief Economist Annabel Bishop, the rand should currently be riding a much bigger wave of strength against the dollar thanks to higher commodity prices.
Unfortunately, this is being blocked by perennial issues with the freight and port sector, which is preventing South Africa from taking full advantage.
With the full month of August’s data now out, commodities prices staged a marked recovery over the month, up 2.6% m/m and 0.9% year to date after a contraction earlier in the month, Bishop noted.
July and August’s data combined saw overall commodities prices 0.2% higher than the first two months of Q2.25, while metals and industrial commodities prices rose by 5.2% and 4.0% respectively.
On top of the higher prices, the US dollar was also 2.3% weaker over the same two-month period.
“However, the higher prices in South Africa’s chief commodities exports, metals and minerals, have not translated into the same strength in the rand,” she said.
The rand was only 2.2% stronger on average on a trade-weighted basis in the two-month period, and the rand against the US dollar is only up 0.9% excluding dollar weakness in the period.
Bishop noted that, according to the latest Ctrack data, South Africa continued to see a deterioration in freight volumes and activity overall from 2024 to the end of the second quarter of 2025.
This includes rail, road, sea, air, pipeline and storage and handling in its supply chain—all limiting exports.
Positively, the state-owned Transnet is lining up public private partnerships on the rail system, which should help resolve these blockages.
But Bishop noted that improvements will take time to materialise, as “private sector rail operators however still need to complete permits, and secure port offloading capacity”.
Private sector ‘railing’ operations are only expected to begin earliest in 2026/27.
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