Rand collapses to new depths against pound

Source: Reuters.

This has dealt a double blow to the rand, with persistent concerns over the potential collapse of the Government of National Unity (GNU), adding additional pressure on the currency.

South African assets have experienced a sharp decline over the past week, with the JSE marking its biggest drop in a single day in five years on Thursday, 3 April 2025.

On 2 April 2025, the National Assembly passed South Africa's contentious Budget, including Finance Minister Godongwana's VAT increase proposal, approved by 194 votes to 182. This move, alongside fears of the GNU's collapse, has unsettled investors, signalling potential instability in South Africa's investment climate.

On this day, the rand weakened against emerging market currencies, driven by the Budget issues. Its decline intensified later as Trump imposed a 31% tariff on South African imports, straining relations with the US, South Africa's second-largest trading partner.

As a result, the rand continued to weaken against the pound on the morning of 7 April, reaching R25.04 at 10:15 am, surpassing the previous peak of R24.94 observed last week.

TreasuryONE’s Andre Botha explained that the rand's particular weakness against the pound was due to the combined impact of the Budget issues and Trump's tariffs.

These events affected both the USD/ZAR and GBP/USD rates, with the US dollar weakening, boosting the pound and exaggerating the rand's decline against the pound, he said.

Trump's tariff plan continues to fuel market volatility, with investors seeking stability in safe-haven currencies like the yen and franc.