{"id":836658,"date":"2025-09-02T16:15:58","date_gmt":"2025-09-02T14:15:58","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=836658"},"modified":"2025-09-02T16:17:03","modified_gmt":"2025-09-02T14:17:03","slug":"the-one-thing-blocking-the-rands-miraculous-turnaround","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/trending\/836658\/the-one-thing-blocking-the-rands-miraculous-turnaround\/","title":{"rendered":"The one thing blocking the rand’s miraculous turnaround"},"content":{"rendered":"\n

South Africa’s rand has flipped the script and emerged much stronger than anyone expected in 2025.<\/p>\n\n\n\n

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.<\/p>\n\n\n\n

The rand has been trading in a relatively stable range between R17.50 and R17.80, effectively shrugging off the market shock<\/strong><\/a> of the Trump tariffs that have hit global trade.<\/p>\n\n\n\n

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.<\/p>\n\n\n\n

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.<\/p>\n\n\n\n

“For years, the rand has followed a familiar cycle: long-term depreciation, brief recoveries, then renewed weakness,” Turp said.<\/p>\n\n\n\n

“Inflation gaps and rising risk premia tied to weak fiscal metrics kept it on that path. Now the story looks different.”<\/p>\n\n\n\n

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. <\/p>\n\n\n\n

With its credibility, CPI could get there sooner than expected, Turp said.<\/p>\n\n\n\n

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. <\/p>\n\n\n\n

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.<\/p>\n\n\n\n

This comes as South African exports and industries are already under pressure from the weak economy and external challenges with tariffs.<\/p>\n\n\n\n

But even with the downside factored in, the rand has surprised on the stronger side, leaving many confounded.<\/p>\n\n\n\n

South Africa builds its own roadblock<\/h2>\n\n\n\n
\"\"<\/a><\/figure>\n\n\n\n

Despite the rand’s strength and reversal in sentiment, the currency is still far off from its PPP and fair values.<\/p>\n\n\n\n

The Economist’s Big Mac Index indicates that the rand should be trading at a purchasing power parity (PPP) value of around R13\/$<\/strong><\/a>, while economists generally see the rand’s fair value being around R16\/$.<\/p>\n\n\n\n

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.<\/p>\n\n\n\n

Unfortunately, this is being blocked by perennial issues with the freight and port sector, which is preventing South Africa from taking full advantage.<\/p>\n\n\n\n

With the full month of August\u2019s 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.<\/p>\n\n\n\n

July and August\u2019s 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.<\/p>\n\n\n\n

On top of the higher prices, the US dollar was also 2.3% weaker over the same two-month period.<\/p>\n\n\n\n

“However, the higher prices in South Africa\u2019s chief commodities exports, metals and minerals, have not translated into the same strength in the rand,” she said.<\/p>\n\n\n\n

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.<\/p>\n\n\n\n

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.<\/p>\n\n\n\n

This includes rail, road, sea, air, pipeline and storage and handling in its supply chain\u2014all limiting exports.<\/p>\n\n\n\n

Positively, the state-owned Transnet is lining up public private partnerships on the rail system, which should help resolve these blockages.<\/p>\n\n\n\n

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”.<\/p>\n\n\n\n

Private sector \u2018railing\u2019 operations are only expected to begin earliest in 2026\/27.<\/p>\n","protected":false},"excerpt":{"rendered":"

South Africa’s rand has flipped the script and emerged much stronger than anyone expected in 2025, but it’s still being blocked from reaching its full potential.<\/p>\n","protected":false},"author":10,"featured_media":817333,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11121,1],"tags":[19853,3670,10319],"class_list":["post-836658","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-finance","category-trending","tag-annabel-bishop","tag-rand","tag-sanlam-investments"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/836658","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=836658"}],"version-history":[{"count":1,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/836658\/revisions"}],"predecessor-version":[{"id":836672,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/836658\/revisions\/836672"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/817333"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=836658"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=836658"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=836658"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}