The rand briefly broke through R18 earlier this week and is currently sitting just above it as I write this.
Looking back five years, the rand has essentially retained its purchasing power.
Looking back over the past five years, what’s striking is how little it’s moved.
If you had asked someone in 2020 where the rand would be in five years, most would have guessed R20 or even R25 to the dollar. That never happened.
The lesson? Don’t place too much faith in currency forecasts — they’re almost always wrong.
Here’s another way to look at it from a South African perspective: the chart below shows the rand depreciation vs the dollar and the JSE All Share Index returns over the past five years.
Can you believe the rand has only weakened 2% over the past 5 years? And even more impressive — the JSE All Share Index generated an annualised return of 17% over the same period.
That’s incredible. Reminiscent of the type of local market returns we saw back in the mid 2000s.
From a dollar perspective, investing in the JSE would have given you an annualised return of 16.7% over the past five years. Americans would be over the moon with that kind of return.
Now, take a look at the long-term chart below. I’ve highlighted two key periods:
- The early 2000s, when the rand held its strength for over a decade
- The more recent period, where it’s been volatile — but broadly stable in the bigger picture
The point is that the rand can — and sometimes does — go through extended periods of strength.
The rand isn’t driven by our politics. It’s driven by global cycles: dollar strength, commodity prices, and global economic growth rates. Of course, with some real effort, our politicians still manage to tank the rand every now and then. That’s also cyclical.
Maybe the rand enters another decade of strength. That wouldn’t be unprecedented — and it’s certainly possible.
The real question is: how would your portfolio hold up if that happens? If you’re 100% offshore but drawing a local income, prolonged rand strength could pose a real challenge.
It’s worth thinking about.
