Beyond the Glitter: Why Analysts Say the Undervalued Rand Still Has Room to Run

Is the South African rand shining with borrowed light, or does it have a genuine, enduring glow? According to a new survey of investors and economists, the currency’s recent strength isn’t just a flash in the panit’s undervalued at current levels, with scope for further appreciation if the government stays the reform course.

A Bloomberg survey of 14 respondents placed the rand’s fair value at an average of R15.64 per US dollar, with half the participants viewing it as undervalued. The currency was trading around R15.98/$ on Monday, recovering from a sharp sell-off at the end of last week. The rand is up about 3% this year, building on significant gains in 2025.

The Bull Case: Reforms, Trade, and Foreign Interest

The optimism is underpinned by a confluence of positive factors. Structural reforms under initiatives like Operation Vulindlela, aimed at fixing energy, logistics, and water crises, are gradually bearing fruit. Combined with fiscal consolidation, this is helping to contain inflation and borrowing costs.

Critically, South Africa’s terms of trade have improved dramatically. High prices for key exports like gold and platinum, coupled with relatively low oil costs, are boosting the current account and luring foreign investors back to local stocks and bonds.

“While global factors such as the dollar and interest rates matter, any deviation from fiscal consolidation, particularly excessive growth in public debt, would have the most immediate impact on the exchange rate,” said Frank Blackmore, lead economist at KPMG in Johannesburg, who sees the rand appreciating to R15.50/$ by year-end.

The Cautionary Voices and Key Risks

Not all forecasts are as sunny. The South African Reserve Bank (SARB) projects a weaker rand, around R16.73/$ in the second quarter of 2026, citing broader global and domestic risks. Some analysts, like Kim Silberman of Matrix Fund Managers, place fair value closer to R16.70/$, noting the rand remains a “high-beta, commodity-linked currency.”

The key risks are clear: a sudden reversal in commodity prices or a resurgent US dollar could swiftly undermine the rally. The rand’s vulnerability was on display last week when a gold price shakeout triggered a sell-off.

The immediate litmus test will be Finance Minister Enoch Godongwana’s national budget on 25 February. Markets will scrutinize it for commitment to debt stabilization and reform funding. If the government keeps its foot on the reform pedal, the consensus suggests the rand’s shine isn’t just metallic ,it’s structural, with room to brighten further.