South Africa’s rand hits a sweet spot 

South Africa’s rand is on a winning streak, gaining against major world currencies in its own right, marking a departure from 2025.

While the rand also strengthened significantly against the US dollar in 2025, this was driven largely by the greenback’s weakness, as opposed to the local currency’s strength.

However, in 2026, the rand has several domestic factors backing its strength, allowing the local currency to gain in its own right.

Investec chief economist Annabel Bishop pointed out that, in the year to date, the rand is 7.7% stronger generally against the currencies of key trading partners.

Specifically, the local currency is up 1.4% against the euro, 5.3% against the British pound, 15.5% against the US dollar, and around 15% against the Chinese yuan.

“The domestic currency has seen some strength on a trade-weighted basis this year, and not just against the US dollar alone as occurred over most of 2025,” Bishop said.

She attributed this, in part, to South Africa’s positive economic outlook, which has brightened as structural constraints are being worked down.

Bishop pointed to several factors working in South Africa, and therefore the rand’s favour. This includes the country’s credit rating upgrade from S&P, removal from the greylist, low inflation and low interest rates.

In addition, she highlighted South Africa’s improved fundamentals, including relief from structural impediments such as load-shedding, Eskom’s improved energy availability factor, and government plans to end load reduction.

“In addition, the implementation drive on Operation Vulindlela has seen marked progress on reducing the infrastructure crisis, with Transnet stabilised, port traffic has been improving, and private operators on rail are expected from 2026/27,” she said.

Bishop explained that this has benefited investor sentiment and reduced South Africa’s political risk, spelling good news for the local currency.

“Numerous economic indicators point to an acceleration in economic growth this year over last year’s growth outcome, as both the financial markets and domestic economic environment have increasingly found themselves in a sweet spot,” she said.

“An improving growth outlook lifts the prospects for state finances as revenues would be expected to climb, while progress at the ports and rail, which has seen the domestic freight crisis stabilise, then begin some decline, benefiting exports.”

All eyes on Godongwana

Improving economic fundamentals certainly play a role in the rand’s recent strength, but the local currency has also benefited immensely from an ongoing commodity rally.

While weaker than in 2025 following a recent sell-off, commodity markets are still running hot in 2026, with precious metal prices near all-time highs.

This has spelt good news for South Africa’s commodity-driven economy, with many of the world’s largest gold and platinum group metals producers operating locally.

Therefore, higher commodity prices have narrowed South Africa’s current account, with the Bank of America (BofA) forecasting a 0.5% of GDP current account surplus in 2026 and a balanced current account in 2027.

This, in turn, has and will continue to benefit the rand, with BofA research estimating that the currency will end the year at around R15.60/USD.

Another factor Bishop pointed to as a potential boost for the rand is the upcoming tabling of South Africa’s 2026 Budget.

Finance Minister Enoch Godongwana is set to present South Africa’s 2026 Budget on 25 February, with expectations set that he will announce another primary budget surplus.

This would mark South Africa’s third consecutive primary budget surplus, a significant achievement following over a decade of deficits.

A primary budget surplus allows the state to stabilise and, eventually, chip away at its debt burden, thereby reducing debt service costs and freeing up spending for more productive line items.

Bishop cautioned that there are risks, with current projections showing the full-year deficit below the budgeted level in the Medium-Term Budget Policy Statement.

She said much depends on additional spending and potential overspending, which could influence the country’s fiscal outlook.

Regardless, she explained that the upcoming Budget offers scope for further rand strengthening, particularly if government borrowing as a percentage of GDP is lower than projected.