Why the Rand’s Comeback Might Not Last And What South Africans Should Really Expect Next

A Year of Unexpected Strength

For the first time in a long time, South Africans have watched the rand quietly claw its way back against the US dollar. From sitting at around R18.18/$ a year ago, the currency has strengthened to roughly R17.13/$ , a level many didn’t expect to see again so soon.

Globally, the dollar has been slipping as US fiscal concerns rise, interest rates ease and the new administration leans toward a weaker currency. Locally, South Africa has actually done a few things right:
✔️ A ratings upgrade from S&P Global
✔️ Removal from the FATF grey list
✔️ Strong market performance compared to peers

It’s a rare moment where international winds and domestic improvements are blowing in the same direction.

But financial experts are urging caution: a stronger rand today doesn’t guarantee a stronger rand tomorrow.

The Big Mac Reality Check

South Africans love a bargain, and according to the Big Mac Index, the rand is still one of the biggest bargains in the world.

• Big Mac in SA: R53.90

• Big Mac in the US: $6.01

• Implied fair exchange rate: R8.97/$

Compared to an actual exchange rate of around R17.88 at the time of the index, the rand appears almost 50% undervalued.

It’s a fun indicator, but it’s also a reminder that currencies don’t operate in neat, predictable lines. They move with politics, sentiment, policy, investor confidence and sometimes, pure speculation.

So when the Big Mac Index says the rand should be under R10 to the dollar, economists simply shake their heads.

‘Don’t Expect a Miracle Correction’, Expert Warning

Dan Kemp, Chief Investment Officer at Morningstar, says it plainly:
Currencies don’t snap back to “fair value” quickly, even when they’re heavily undervalued.

According to him:

• A correction can take months… or even up to five years.

• Undervaluation doesn’t automatically mean a rally is coming.

• South Africans should not expect the rand to march toward R8.97/$ anytime soon.

In short: yes, the rand is cheap. No, that doesn’t mean it’s about to boom.

South Africa Is Quietly Outperforming, But There’s a Catch

While the rand’s recovery has hogged headlines, another story has been unfolding beneath the surface. From January to September, South Africa has been one of the best-performing markets globally, delivering a 42% return in US dollars.

But there’s a nuance Kemp highlights:
This surge is not due to broad economic strength. It’s driven heavily by single-commodity miners, especially in gold and platinum sectors known for volatility rather than stability.

And despite this standout performance, foreign investors remain lukewarm. South Africa still accounts for only 3% of the emerging market universe, far behind fast-growing favourites like Brazil and Mexico.

Where Local Investors Should Look Instead

Despite hesitation from foreign investors, Morningstar believes there’s still real value for South Africans in their home market, particularly in:

1. Diversified Miners

Companies like BHP, Anglo American and Glencore offer balanced exposure across multiple commodities a safer bet than pure gold or platinum plays, which Morningstar says are already “fully priced.”

2. South Africa’s Big Five Banks

Local banks continue to trade at attractive valuations and remain some of the most consistent performers on the JSE.
For rand-based investors seeking long-term stability, the financial sector offers meaningful upside.

What Ordinary South Africans Are Saying

Online, the reaction to the rand’s stronger performance has ranged from:

• Optimism (“Finally some good economic news!”)

• Scepticism (“We’ve seen this movie before.”)

• Humour (“Wake me up when it hits R10 or when Eskom hits Stage 0.”)

The mood reflects what many South Africans know intuitively: currency strength doesn’t mean food gets cheaper, petrol stabilises, or electricity magically becomes reliable. A strong rand is great, but it’s not a magic wand.

Enjoy the Strength, But Stay Realistic

The rand’s recent rally is a welcome surprise, driven by both global shifts and local improvements. But South Africans shouldn’t expect the currency to suddenly rewrite its long-term narrative.

The fundamentals still matter:

• Weak economic growth

• Limited foreign investment

• Commodity dependence

• Policy uncertainty

For now, the rand may continue to benefit from global trends, but as Kemp warns, its journey to “fair value” is slow, unpredictable and often disappointing.

South Africa is heading in the right direction, just not quickly enough to expect a single-digit rand any time soon.

{Source: BusinessTech}

Follow Joburg ETC on Facebook, Twitter , TikTok and Instagram

For more News in Johannesburg, visit joburgetc.com