With global economic uncertainty and the ongoing Middle East conflict weighing on markets, rand volatility has emerged as a significant threat to profitability for South African businesses, while consumers face mounting pressure from rising costs.
Analysts indicate that while a weaker rand can boost export competitiveness, unpredictable currency swings can erode margins for exporters and drive cost increases for importers. The debate is increasingly focused on how South African businesses can better manage their currency risk exposure.
Harry Scherzer, CEO of Future Forex, said the rand has been “ridiculously volatile” since the start of the war involving Iran, America, and Israel.
“The more that war tensions have escalated, the worse the rand has done relative to the dollar – the weaker it’s become,” Scherzer explained. He noted that when de-escalation occurs, such as following recent comments by Donald Trump, the rand strengthened back to around 16.4 to the dollar from 16.8 earlier in the week.
Scherzer warned that a weaker rand makes imported goods more expensive, citing petrol and oil as key examples. “The cost of goods goes up because we’re paying dollar prices, but when the rand weakens relative to the dollar, it becomes more in rand terms,” he said. “When the rand weakens, it’s not good for South Africa’s economy and it’s not good for consumers.”
The CEO explained that even South Africans who do not buy anything directly from abroad are still affected through transport and logistics costs. “To get the food into the shops, there’s transport involved and logistics involved. If the rand weakens, we’re paying more in rand terms, which means the cost of those goods increases,” he said.
On government relief measures, Scherzer noted that the temporary cut to the fuel levy provides relief only until July, when the full levy is set to be reinstated. “When they do so, the price of fuel is going to increase, which directly impacts those filling up their cars. But even those who aren’t filling up their cars are going to be affected through the cost of goods in the shops,” he said.
He warned that the return of the full fuel levy could create inflationary pressures, potentially forcing the central bank to keep interest rates high for longer. “The cost of borrowing may stay high for longer,” Scherzer said.
He concluded that South Africans should hope for de-escalation of the war and the reopening of the Strait of Hormuz to secure cheaper oil. “If we don’t, we might be looking at a situation by July where there are even more expensive prices for fuel, and as a result, the price of everything goes up more – which is not a good situation for South Africa.”