{"id":816948,"date":"2025-03-16T12:58:00","date_gmt":"2025-03-16T10:58:00","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=816948"},"modified":"2025-03-16T12:58:14","modified_gmt":"2025-03-16T10:58:14","slug":"how-much-the-rand-should-be-worth","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/finance\/816948\/how-much-the-rand-should-be-worth\/","title":{"rendered":"How much the rand should be worth"},"content":{"rendered":"\n

Efficient Group chief economist Dawie Roodt revealed that the rand’s fair value is between R14.91 and R17.44 to the US Dollar, much stronger than where it is trading now.<\/p>\n\n\n\n

He shared his views on the rand during a presentation about the 2025 Budget delivered by Finance Minister Enoch Godongwana on Wednesday, 12 March.<\/p>\n\n\n\n

The rand has been volatile over the last year, ranging from R19.23 against the UD Dollar in April 2024 to R17.10 in September 2024.<\/p>\n\n\n\n

The International Monetary Fund (IMF) warned that the rand\u2019s volatility limits the country\u2019s growth by preventing local firms from engaging in long-term investments.<\/p>\n\n\n\n

The South African currency’s unpredictability also scares away many risk-averse foreign investors who prefer certainty over potentially high returns.<\/p>\n\n\n\n

The challenge of the rand is that it is traded in large volumes globally and is seen as a proxy for emerging market investment.<\/p>\n\n\n\n

It makes the South African currency highly exposed to external shocks and global events and, thus, highly volatile.<\/p>\n\n\n\n

Roodt said the rand traditionally traded at weaker levels than it should due to structural problems in the South African economy.<\/p>\n\n\n\n

These problems include poor fiscal discipline from the government and slow economic growth due to business unfriendly policies.<\/p>\n\n\n\n

Nedbank chief economist Nicky Weimar said the rand has largely held its own in 2025 due to the reduced risk premium since the Government of National Unity (GNU) was formed.<\/p>\n\n\n\n

Weimar explained that investors are currently giving South Africa the benefit of the doubt, which bolsters the rand.<\/p>\n\n\n\n

She expects the Reserve Bank to watch the rand closely amid increased global uncertainty and the intensification of the US-China trade war.<\/p>\n\n\n\n

These promise to boost the dollar in the short term and weaken emerging market currencies like the rand.<\/p>\n\n\n\n

Furthermore, US President Trump\u2019s attacks on South Africa are expected to gradually weaken the local currency as foreign investors look to \u2018Trump-proof\u2019 their investments.<\/p>\n\n\n\n

Despite this, the rand has held its own since Trump ascended to the White House and has not spiked to over R20 to the US dollar as some expected.<\/p>\n\n\n\n

\"\"<\/a>
Economist Dawie Roodt<\/figcaption><\/figure>\n\n\n\n

Dawie Roodt\u2019s fair value of the rand<\/strong><\/h2>\n\n\n\n

Roodt calculated the rand’s fair value to be between R14.91 and R17.44 to the US Dollar using Purchasing Power Parity (PPP) and the currency\u2019s historical undervaluation.<\/p>\n\n\n\n

To calculate the fair value, he used a basket of goods to calculate the purchasing power of the rand, similar to how The Economist\u2019s Big Mac Index works.<\/p>\n\n\n\n

He then adds the historical average undervaluation of the rand versus the dollar to its PPP to get its fair value.<\/p>\n\n\n\n

A currency never trades exactly at its fair value and, in the case of the rand, always trades weaker than its fair value.<\/p>\n\n\n\n

This means that one has to factor in the undervaluation of the currency to get an accurate, fair value. On average, the rand trades around 50% weaker than its fair value.<\/p>\n\n\n\n

The rand’s value follows a pattern where there is usually a momentary crisis, which results in a sharp decline in the rand\u2019s value, followed by a gradual recovery to fair value.<\/p>\n\n\n\n

Thus, the rand should incrementally appreciate against the dollar over the next few years as it is currently undervalued.<\/p>\n\n\n\n

Roodt said that the rand can be considered strong when it trades between R12.21 and R13.85 to the greenback.<\/p>\n\n\n\n

The far value is between R14.91 and R17.44 to the US Dollar, and it can be considered weak when it trades between R18.90 and R23.12.<\/p>\n\n\n\n

The chart below, courtesy of Efficient Group, shows Roodt\u2019s rand fairness barometer based on his model.<\/p>\n\n\n\n

\"\"<\/a><\/figure>\n","protected":false},"excerpt":{"rendered":"

Efficient Group chief economist Dawie Roodt revealed the rand’s fair value compared to where it is trading now.<\/p>\n","protected":false},"author":10,"featured_media":797846,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11121],"tags":[1459,2562,17448,21799,22028,22029,3670],"class_list":["post-816948","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-finance","tag-dawie-roodt","tag-efficient-group","tag-enoch-godongwana","tag-finance-minister-enoch-godongwana","tag-international-monetary-fund-imf","tag-nicky-weimar","tag-rand"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/816948","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/users\/10"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/comments?post=816948"}],"version-history":[{"count":1,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/816948\/revisions"}],"predecessor-version":[{"id":816950,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/816948\/revisions\/816950"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/797846"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=816948"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=816948"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=816948"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}