By the start of the market on September 25, 2024, the South African Rand (ZAR) has grown by 11% against the US dollar since its low in February. This is because South Africa’s economy did well in key areas from the second to the third quarter of 2024.
On September 3, 2024, the official Statistics South Africa (Stats SA) said the country’s economy grew by 0.4% from April to June. This happened because important parts of the economy got better.
In the second quarter of 2024, the electricity and transport sectors improved. Also, the price of gold went up by 28% for the year. These helped the economy grow, and the Rand became stronger.
What’s Happening Now and Why
The Rand’s value has gone up because of several good things. The economy is doing better, electricity is more stable, transport is better, and gold prices went up by 28% this year.
On September 18, 2024, the US Federal Reserve cut interest rates, which made the US dollar weaker. This helped the Rand to strengthen, going from 19.20 ZAR in February 2024 to 17.25 ZAR by September 25, 2024.
Just so you know, the Rand was quite stable at 13 ZAR to the dollar back in May 2021 when the economy was good.
But things got tough between 2022 and 2023. Power shortages and lower prices for important goods like gold and platinum made the economy weak, and the Rand lost value.
By May 2023, the Rand dropped by 30% to 15 ZAR against the dollar.
Since early 2024, the Rand improved again, gaining 10% value and reaching 17.25 ZAR against the dollar by September 25.
How the Market Reacted to Economic Recovery
- South Africa’s currency got better in the second quarter of 2024, thanks to improvements in electricity supply.
- The country’s power grid capacity increased to 32,816 MW, which is much more than the expected 15,500 MW for unplanned outages.
- Because of this, the economy grew by 0.4% from April to June. This was also helped by a 20% rise in gold prices this year, adding more to economic growth.
- The recent drop in the US dollar, due to the Federal Reserve’s rate cut, gave extra energy for the Rand’s almost 10% recovery.
President’s Plan for More Growth
President Cyril Ramaphosa recently shared plans for future growth in our country:
“We want to turn our country into a construction site, building roads, bridges, houses, schools, hospitals, and clinics… and putting up new power lines.”
He also talked about the commitment to renewable energy, saying, “We have many planned projects for renewable energy that will make over 22,500 megawatts.”