Rand set to make a comeback

 ·9 May 2024

Investec is expecting the rand to reach close to R15.00 in the coming years, but this is dependent on several global and domestic factors, such as the upcoming election.

According to Investec Chief Economist Annabel Bishop, the rand has been constrained by risk-averse sentiment, with the expected delay in interest rate cuts in the USA hurting emerging markets.

Cuts in the Fed funds futures are now being pushed back to Q4.24, which has kept the domestic currency to R18.60/$ today, 9 May 2024, despite the notable improvement in load shedding.

The Institute of International Finance (IIF) said South Africa needs to improve investor confidence after a long period of capital flight.

“Global financial flows into emerging markets will benefit the rand when the US interest rate cut cycle begins, with historically very substantial rand strength being seen,” said Bishop.

“We expect the rand to pull towards its purchasing power parity of R15.00/$ over the next few years.”


Investec’s expected case outlook for the rand is, however, also dependent on the outcome of South Africa’s national election later this month.

Investec expects that ANC will get around 45% of the vote, which will lead to an ANC/IFP (plus African Christian Democratic Party (ACDP) and some smaller parties if necessary) national coalition.

The IIF said that there is an 80% to 85% probability that the ruling ANC would not fall below 45% ahead of the next national election and that a colation with the IFP will be seen as a relatively market-friendly approach.

Investec holds a 40% probability of an ANC/IFP national coalition; it also has a 25% probability of an ANC/The Multi-Party Charter (MPC) national coalition and 10% of a sustained ANC/MPC coalition.

The MPC features several opposition political parties, including the Democratic Alliance, ActionSA, Freedom Front Plus, and the IFP. Despite joining arms to get the ANC out of power nationally, there are question marks over how committed the parties are to the charter.

“The downside for financial markets is an ANC/EFF national coalition, while a prolonged, lengthy ANC/EFF coalition nationally is not seen as likely (5%) due to the unsustainability of the impact on government finances, financial markets etc,” said Bishop.

“Investor sentiment would be expected to collapse (not the expected case) after the election on the announcement of an ANC/EFF coalition/s (down case), seeing the rand depreciate sharply, bond yields spike up, and financial instability ensue.”

Read: The crisis eating up middle-class budgets in South Africa

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