Rand hits R25 to the British Pound for the first time in history

The South African rand hit R25 to the British pound in early morning trade on Monday, 7 April, marking its lowest-ever value versus the pound sterling. 

The local currency has since strengthened to below R25 to the pound but remains at its weakest level versus the British currency in history. 

The rand extended its losses against major currencies following the fallout from South Africa’s Budget debacle and the United States’ imposition of severe tariffs. 

This has been a double blow for the rand, with ongoing fears about the Government of National Unity (GNU) coming to an end, putting further pressure on the currency. 

South African assets have plummeted in value over the past week, with the JSE seeing its steepest decline in five years on Thursday, 3 April 2025. 

The JSE All Share Index fell 4.5% in a single day as the National Assembly passed the country’s contentious Budget and Donald Trump unveiled his tariff plan.

On Wednesday, 2 April, the National Assembly approved the fiscal framework, which establishes economic policy, revenue projections, and limits on government spending, by 194 votes to 182.

This included Finance Minister Enoch Godongwana’s proposal to increase VAT to raise additional revenue for the government. 

It was accompanied by a non-binding recommendation that the National Treasury consider an alternative way to raise revenue.

This vote has unnerved investors as it could signal the end of the GNU, which has been responsible for a significant reduction in the risk associated with investing in South Africa. 

The rand’s initial weakening on 2 April was specific to the currency as it declined in value versus other emerging market currencies, indicating that the main driver was the debacle surrounding the Budget.

Its decline versus major currencies, such as the US dollar, pound, and euro, accelerated in the evening as Trump unveiled his tariff plan. 

Trump slapped a 31% tax on imports from South Africa, one of the highest levies he imposed in a sweeping revamp of global trade that has rattled markets around the world.

According to Bloomberg data, the United States is South Africa’s biggest trading partner after China, accounting for about 11% of the country’s exports.

“With the uneven tariff impositions, demand for South African goods will lose out,” said Annabel Bishop, chief economist at Investec Bank.

Apart from the potential impact on South African exports, these tariffs also introduce significant uncertainty into financial markets. 

This typically pushes investors towards safe havens, such as the dollar and other major currencies and out of emerging market currencies, such as the rand. 

Rand versus pound

While it is clear why the rand has weakened versus major currencies, it is much less clear why it has been particularly weak versus the British pound. 

TreasuryONE’s head of execution, Andre Botha, explained that the particular weakness versus the pound was mainly due to both events happening in a short space of time. 

Botha explained that the pound-rand rate has two legs – the USD/ZAR rate and the GBP/USD rate.

The combination of the Budget debacle and Trump’s tariffs impacted both of these legs, compounding the effect on the rand. 

The US dollar came under pressure following Trump’s tariff imposition, and the pound strengthened versus the greenback as the American currency weakened. 

Thus, the move in the so-called ‘cross currencies’ like the British pound was exaggerated because of the double shock of a weakening rand and a weakening dollar against the pound. 

As a result, the rand weakened further against the pound on the morning of 7 April, hitting R25.04 at 10:15 am, compared to the previous highest level of R24.94 seen last week.

As of 11:00, the rand has strengthened slightly versus the pound back to R24.94. 

Financial markets continue to be roiled by Trump’s tariff plan, with volatility surging as investors search for stability and safety.

Trump has shown no signs of backing away from his tariff plans, with investors pumping money into ‘safe-haven’ currencies such as the Japanese yen and Swiss franc. 

The rand is highly sensitive to risk and tends to be dumped at times of global market uncertainty in favour of more stable currencies. 

While Trump is focused on reciprocal tariffs, he explained that the United States would only be implementing “discounted” rates.

For example, while Trump claims China is imposing tariffs of 67% on the US, the US would charge a “discounted” rate of only 34%.

For South Africa, Trump claimed that the tariffs on the United States amounted to 60%. In turn, it will implement a “discounted” 30% tariff on the country.

“A lot of bad things are happening in South Africa,” Trump said. “We send them billions of dollars, but we had to cut their funding because bad things are happening.”