The rand has faced an increasingly challenging month after it hit a record high of R19.93\/$. The rand was severely impacted by the tariffs imposed by US President Donald Trump and fears over the GNU.<\/p>\n\n\n\n
However, the rand returned to its forecasts of R18.60\/$ for the quarter. Investec Chief Economist Annabel Bishop said the rand weakened after fears that the pro-business DA would exit the GNU.<\/p>\n\n\n\n
The DA’s position in the GNU was under severe scrutiny after it did not pass Budget 2.0, which included a proposed VAT hike from 15% to 16% by 2026. This came after the first Budget was postponed due to conflicts within the GNU.<\/p>\n\n\n\n
Budget 2.0 passed without the DA’s support, and non-GNU members needed to pass the budget in parliament.<\/p>\n\n\n\n
However, following widespread criticism of the tax increase, Finance Minister Enoch Godongwana effectively withdrew Budget 2.0, stopping the VAT increase.<\/p>\n\n\n\n
The DA also defeated Godongwana and parliament’s leaders in court over the passing of the fiscal framework.<\/p>\n\n\n\n
The ruling by the Western Cape High Court stopped the VAT increase to 15.5% on 1 May 2025, as the rise would have still gone ahead as per the VAT Act, even though the Budget was withdrawn.<\/p>\n\n\n\n
South Africa’s two largest parties have since agreed to work closely together, which should ensure that Budget 3.0 passes through parliament.<\/p>\n\n\n\n
The rand is also set to benefit from the improved relationship between the USA and China after the two countries effectively started a trade war. The improvement should boost the global economy.<\/p>\n\n\n\n
However, Bishop noted that the rand remains highly volatile and susceptible to global financial market movements and local politics.<\/p>\n\n\n
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