Stronger rand has mixed effects

Some South Africans are winning big while others barely notice

- SANJITH HANNUMAN

THE rand touched R16.31 to the dollar in early January 2026, capping a remarkable 14% rally - its best performance since 2009 (‘Trading Economics, 2026). As South Africans welcomed the new year with fuel prices at four-year lows — petrol down 66 cents and diesel slashed by R1.50 per litre (Government of SA, 2026) - economists debate who actually benefits from currency strength and whether South Africa can sustain this momentum.

The rand’s resurgence stems from four converging forces. First, US dollar weakness as the Federal Reserve cuts rates. Investec Chief Economist Annabel Bishop notes “US dollar weakness of 8.9% has seen the rand strengthen by 8.5%,” cautioning the rand “takes much of its direction from dollar movements” (IOL, 2025a). Second, removal from the FATF grey list restored investor confidence. Third, the Reserve Bank’s 3% inflation target reduced government borrowing costs by up to 160 basis points (CNBCAfrica, 2025a). Fourth, gold above $4 000 per ounce provides commodity support.

However, Stanlib Chief Economist Kevin Lings explains that with the dollar weakening 9.7%, “the rand is not as strong as it seems” (Daily Investor, 2025). Standard Bank’s Goolam Ballim forecasts the rand will end 2026 around R17.96, noting fair value sits between R17.80-R18.00 (Daily Investor, 2025b).

There is lots of good news in the midst of poor governance. South Africans began 2026 with the cheapest fuel in four years. Currency appreciation alone contributed 20.80 cents to petrol price declines and 22.12 cents to diesel (SerrariGroup, 2026). For the 66% of South Africans who depend on minibus taxis to reach work (The SouthAfrican, 2025), this matters enormously.

Economist Dawie Roodt credits the convergence of “lower interest rates, dollar weakening, rand strengthening, lower oil prices, and higher gold prices” for creating conditions where “all the conditions are right for growth” (IOL, 2025b).