Feb 20, 2026 (GroundUp/All Africa Global Media via COMTEX) --
Why the "commodities boom" has made a difference
A year ago, you'd have had to pay R18.49 for a US dollar if you wanted to buy something from the US. Yesterday, you'd have had to pay just R16.05.
The rand has also strengthened against many other currencies. Why?
A weaker dollar
Uncertainty over US President Donald Trump's policies has led to the weakening of the dollar against most currencies. This is one reason why the rand is so much stronger against the US dollar; it has gained less ground against most other currencies.
Commodities
Over the long term, the exchange rate of the rand is closely linked to commodity prices, as economists have shown.
Commodities are goods like gold, platinum, chrome, copper and other raw materials, as well as farm produce like wheat.
South Africa is earning more US dollars for gold and platinum exports than a year ago. More dollars earned by South African mining companies means more dollars sold to the banks, who in turn sell these dollars (or other currencies) to businesses which import.
The more our exporters sell, say, dollars, to buy rands, the more the exchange rate of the rand goes up against the dollar.
Over the last year or so South Africa has benefitted from this commodities boom.
Safe haven
In times of economic and political uncertainty, investors often shift money into investments which are considered "safe havens", especially gold and silver.
On the political front, the wars in Ukraine and Gaza, and President Donald Trump's threats about Greenland have made markets jittery. On the economic front, the huge hole in the US state budget, Trump's unpredictable decisions on tariffs, and concerns about some of his economic policies have also encouraged investors to "go for gold", and this has sent the gold price to record levels. South Africa is a big gold exporter, so this has boosted the rand.
"Emerging markets"
South Africa's own economic outlook is also a factor. Though for many South Africans life may not be improving much, foreign investors are reassured by several factors. They note the stability of the Government of National Unity, Minister of Finance Enoch Godongwana's attempts to balance the country's budget, the Reserve Bank's success in fighting inflation (rising inflation is a problem for investors because it means the returns on their investments are worth less), the end of load-shedding (for the moment, anyway), and progress getting the ports and railways working better. All this means that foreign investors are more likely to buy South African assets, which means exchanging other currencies for rands.
Speculators
But while the current long term trend is up, in the short term the rand exchange rate can bounce around quite a bit.
This is because it is a "floating" currency - not pegged to any other currency - and the exchange rate is not managed by the SA Reserve Bank. It is also a very "liquid" currency, which means it is easy to buy and sell rands.
Short-term changes are partly driven by speculators, looking to make a quick profit on changes in exchange rates or other prices. They can move many millions of dollars at the click of a computer key. And their outlook changes rapidly in response to a host of factors, from Trump's latest utterances to news about the Chinese economy or what Godongwana says in next week's budget speech.
These day-to-day movements do not affect prices in the shops or wages, though they do affect importers and exporters of goods and services. Long-term movements in the exchange rate, on the other hand, affect all of us, because they affect the prices of imported goods and the competitiveness of our exports.
This is part of an occasional series on issues in economics. GroundUp is grateful to Andrew Donaldson of the Southern Africa Labour and Development Research Unit for advice on the series.
COMTEX_473881565/2029/2026-02-20T03:31:31
by Groundup Staff
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