Big swing for the rand

The rand has recovered significantly after the chaos of the past week, pulling back below R19 to the dollar as both the US tariff was and shakiness in the Government of National Unity (GNU) ease.

After hitting a all-time worst of R19.93 against the dollar on Wednesday (9 April) as US President Donald Trump’s ‘reciprocal’ tariffs kicked in, the rand has recovered to R18.90/$ on Monday as market tensions eased.

On the same day the tariffs were to take effect globally, Trump walked them back to the flat rate of 10% across the board, except for China.

This means that a 30% tariff on South Africa exports fell back to 10%—although restrictive 25% tariffs on automotive exports remain in effect.

According to Investec chief economist Annabel Bishop, this pullback has been a boon for global markets.

The US dollar, meanwhile, continues to slide to multiyear lows, causing other currencies such as the euro to also gain against it.

However, the rand has not crawled out of its hole just yet, with the unit still trading weaker overall—despite the weaker dollar.

“The negative impact of the trade war on commodities prices has also had a depreciating effect on the rand, as the domestic currency was hit from many sides,” Bishop said.

There are also still worries over a recession in the US, which will have implications for the global market.

A US recession could very likely lead to a global recession, which would impact South Africa’s growth even if the country is likely to avoid a recession itself.

Economist Dawie Roodt said South Africa’s economy is already not growing fast enough to keep up with population growth, and the country would be lucky to scape another 1% growth in 2025.

Estimations from National Treasury—1.9% growth—are widely accepted to be overestimated, with most analysts and finance groups putting GDP growth between 1% and 1.5% in 2025.

Aluma Capital chief economist Frederick Mitchell said a global recession would have a dire impact on South Africa’s growth, job market, government finances and trade dynamics.

Rand is on the right track

The rand was at R18.12/$ before the impact of the US liberation day tariffs and threat to the inclusion of the DA in the GNU.

Bishop noted that the issues surrounding the GNU—particularly the worries that the coalition would collapse and the DA would be kicked out or exit—are abating and market confidence is returning.

Weekend negotiations between the two main parties in the GNU, the DA and ANC, reportedly found some solid ground, with all parties now agreeing to find a way to withdraw the contested VAT hike.

The disagreements initially centred over the ANC tabling a national budget not agreed on by other coalition members of the GNU in February, resulting in it not being presented and withdrawn instead.

The ANC then tabled a second budget, which again did not have the full buy-in from the GNU—the DA in particular.

According to Bishop, the inability for compromise over the budget saw very severe market volatility, as key members in the ANC sought the DA’s summary ejection from the GNU, and the ANC overall sought to dictate the coalition’s terms.

However, these positions have now softened remarkably, with the parties recommitting to the GNU and also committing to better pathways to resolve impasses and contentious issues.

Overall, Bishop noted that markets have calmed down, and the rand is likely to continue to strengthen to the R18.60/$ mark, and is likely to see further strength this quarter.

“South Africa has been successful in reducing some tariffs from the US, and could see further gains,” she said.