{"id":2158,"date":"2026-03-18T11:42:03","date_gmt":"2026-03-18T11:42:03","guid":{"rendered":"https:\/\/www.innov8fs.co.za\/blog\/?p=2158"},"modified":"2026-03-18T11:46:04","modified_gmt":"2026-03-18T11:46:04","slug":"tables-turn-for-the-south-african-rand","status":"publish","type":"post","link":"https:\/\/www.innov8fs.co.za\/blog\/2026\/03\/18\/tables-turn-for-the-south-african-rand\/","title":{"rendered":"Tables turn for the South African rand"},"content":{"rendered":"

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After a strong 2025, the South African rand has had a bruising start to 2026 amid conflict in the Middle East and a resurgent dollar as investors turn risk off and allocate capital to safe-haven assets.<\/p>\n

However, the rand has now also begun to underperform its emerging market peers, reversing a years-long trend that pointed to South Africa\u2019s increasing attractiveness to investors.<\/p>\n

This reversal is largely on the back of other emerging markets being likely to benefit from a significantly higher oil price, with countries such as Nigeria and Angola benefiting amid disrupted supply from the Middle East.<\/p>\n

In contrast, the minerals and metals in South Africa\u2019s basket of commodities have seen their prices fall amid fears of a global economic slowdown.<\/p>\n

This is feedback from Stanlib chief economist Kevin Lings, who outlined the rand\u2019s current woes in his Weekly Focus podcast.<\/p>\n

Lings pointed out that the rand has lost a significant 6.1% against the US dollar in March alone, with the war in Iran kicking off on 28 February.<\/p>\n

The local currency is also down 4.1% on a trade-weighted basis, indicating that the story is largely about a weaker rand, with a slightly stronger dollar also contributing.<\/p>\n

Lings explained that the rand is uniquely vulnerable to external shocks of this nature due to South Africa\u2019s relatively deep and liquid capital markets for an emerging economy.<\/p>\n

Because of these characteristics, the rand is often traded by investors as a proxy for sentiment towards emerging markets more broadly.<\/p>\n

This means the rand tends to be highly volatile and follow broader emerging market trends. However, this has not been the case in recent times.<\/p>\n

The rand strengthened more than its emerging market peers in 2025 as South Africa\u2019s economic and financial fundamentals appeared to be improving after a decade of deterioration.<\/p>\n

Now, the rand has weakened more sharply than its peers since the war in Iran began, despite the country making meaningful progress on its reform agenda.<\/p>\n

Lings explained that the rand\u2019s weakness compared to its peers comes from it being a highly-liquid emerging market currency from an oil-importing country.<\/p>\n

While the currency will move in line with emerging markets currencies more broadly, the fact that the war in Iran has had such an impact on oil prices exaggerates the impact on the rand.<\/p>\n

The rand is the third-worst-performing emerging market currency in March, while others are enjoying a resurgence on the back of elevated oil prices.<\/p>\n

Countries like Nigeria and Angola are expected to benefit from elevated oil prices and disruption in supply from the Middle East, boosting their state finances and currencies.<\/p>\n

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Inflationary shock<\/h3>\n

The rand\u2019s weakness, combined with elevated oil prices, has led to fears of an inflationary shock in South Africa. This could undermine future interest rate cuts and potentially even reverse them.<\/p>\n

Lings is of the view that the Reserve Bank will halt its interest rate cutting cycle to give it time to analyse the potential second-round effects of the oil price shock.<\/p>\n

Inflation does appear to be relatively contained in South Africa, with a surge in fuel prices unlikely to take it out of the Reserve Bank\u2019s one percentage point tolerance band around the 3% target.<\/p>\n

Fuel prices are a relatively small percentage of the consumer price index, accounting for about only 5% of the headline inflation rate.<\/p>\n

The main issue comes from the likelihood that higher fuel prices will push companies to increase prices on goods and services in the economy.<\/p>\n

This deepens the price hikes from fuel into the wider economy and raises inflation across the board. In short, the real question is about how much fuel price increases affect other prices in the economy.<\/p>\n

\u201cAt the current price level, oil has huge implications for South Africa\u2019s petrol and diesel prices. It is starting to set us up for a monster increase in April,\u201d Lings said.<\/p>\n

\u201cIf the conflict were to be ended fairly soon, then our expectation is that the oil price would come back down quite sharply. It can dissipate quite quickly.\u201d<\/p>\n

However, for this to happen, the conflict has to be resolved, which appears to be unlikely given comments from the United States and Iran.<\/p>\n

\u201cThis is going to be a huge shock to South Africa\u2019s household and business sectors in April, and there is not a lot we can do about it,\u201d Lings said.<\/p>\n

The government does not have the ability to limit the impact on consumers, as the country does not have much of a strategic oil reserve, and it does not have the financial capacity to provide a subsidy or reverse tax hikes.<\/p>\n

With interest rate changes, timing is key once again, with the resolution of the conflict in the near term potentially reversing these projected increases.<\/p>\n

\u201cA lot of this depends hugely on how long the conflict lasts. It does not look to us as though there is a huge amount of discussion regarding how this ends,\u201d Lings said.<\/p>\n

Lings has indicated that, at the present price increases to petrol and diesel, the Reserve Bank would halt its cutting cycle and not hike interest rates.<\/p>\n

Prior to the war, Stanlib projected a cut of 25 basis points in March.<\/p>\n

Credit: Shaun Jacobs<\/h6>\n","protected":false},"excerpt":{"rendered":"

After a strong 2025, the South African rand has had a bruising start to 2026 amid conflict in the Middle East and a resurgent dollar…<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[50,4],"tags":[],"class_list":["post-2158","post","type-post","status-publish","format-standard","hentry","category-finance","category-innov8ions"],"_links":{"self":[{"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/posts\/2158","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/comments?post=2158"}],"version-history":[{"count":1,"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/posts\/2158\/revisions"}],"predecessor-version":[{"id":2163,"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/posts\/2158\/revisions\/2163"}],"wp:attachment":[{"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/media?parent=2158"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/categories?post=2158"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/tags?post=2158"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}