The South African Rand (ZAR) had a strong start to the year, but it will face new challenges after recent developments with Donald Trump. Trump recently froze all assistance to South Africa (SA) over allegations the government was confiscating land from white farmers. SA is confronting a fierce global superpower in the U.S. With this dispute, the African country has aligned itself more firmly with China than before, as tensions between the superpowers grow.
Significantly, SA represents a large foothold for China in Africa. As Trump continues to sanction tariffs against countries who oppose him, the conflict could shake things up on a global stage that is already unstable. SA’s economy is reliant on both the U.S. and China. Amid all these tensions, how strong will the South African Rand be in 2025?
The Expropriation Act
In February, Trump froze all foreign assistance to South Africa citing how the country was “confiscating” land and treating “certain classes” of people unfairly.
Trump was referring to a bill passed in January 2025 by SA President Cyril Ramaphosa called the Expropriation Act. The bill provided an update to an apartheid-era law, and aimed to align its legislative framework closer to its post-apartheid constitutional principles.
It expanded the government’s legal grounds for expropriation to include broader public interest goals, including land reform and addressing historical inequalities. Previously, the only legal grounds for expropriation was for a public purpose, such as an infrastructure project.
The fears of appropriation of white-owned farms in SA comes amid heightened tensions related to “farm attacks.” In a recent story by AfriForum, it was speculated there were more attacks than the government declared.
On the other hand, there is little evidence of wide-ranging seizures of land by the South African government. SA’s government claim that no land has been expropriated without due legal process, and this was supported by AgriSA.
While some concerns were raised by provisions in the act which would not provide compensations, these cases were specifically related to abandoned and unused land.
The Bigger Picture
Trump’s freezing of assistance to South Africa is part of a broader policy in which decades of U.S. foreign aid is leveraged to coerce beneficiary nations. On top of this, the Trump administration expelled the SA ambassador with Sen. Marco Rubio saying he was “no longer welcome in this country.”
The trade conflict is also a part of the larger, escalating tension between the U.S. and China.
Along with China, SA was an inaugural member of the U.S-opposed organisation BRICS (Brazil, Russia, India, China, South Africa.) A U.S. concern with BRICS would be the geopolitical power it affords to developing countries in Africa and Asia. BRICS nations, especially China, have been major investors in the developing world. With Trump freezing U.S. investment, developing countries might see it as more profitable to align with BRICS than the U.S.
This is not to say there will be a direct severance of ties between the U.S. and the developing world. Many of these countries’ economies still rely heavily on exports to the U.S. Some countries, like Kenya, rely on military security, too. But Trump’s policies and cutting of U.S. foreign aid will certainly push these countries towards the “no-strings-attached” investments of BRICS members, like China and India.
Additionally, South Africa was the instigator of a UN International Court of Justice case in which Israel’s presence in Palestinian territories was ruled “unlawful.” This certainly strained SA and U.S relations, with the U.S. being the largest global supporter of Israel in this conflict.
How will Gold affect ZAR in 2025?
One of SA’s most significant exports, gold, is enjoying a record-breaking 2025. In 2024, the price of gold broke records rising from $2,000 to $2,600. In the months following, gold broke further records, rising above $3,000 in March 2025. Gold is forecasted to continue breaking records, as international economic and diplomatic relations continue to decline in 2025.
While the price of the rand has not been directly tied to the price of gold since 1971, it is still closely correlated due to significance of gold to the economy. Gold has made up over 10% of SA’s entire exports over the past decade. This was perhaps reflected in the ZAR’s strong start to 2025. Following Trump’s inauguration, the U.S. president’s stringent “America first” policies shed some doubt over the future of the rand.
Gold exports have seen a year-on-year increase in SA, upon what was already a positive trade balance. China was the destination for a 38.9% majority of gold exports in 2023, demonstrating SA’s dependence on its ally.
The price of gold rising could push the rand up further, especially if SA is encouraged to tap into resources that are more difficult to mine. But while rising gold prices may support the rand, due to the scale of the conflict between the U.S. and China it’s unlikely to make or break the rand’s value in 2025.
How Strong will ZAR be in 2025?
The rand has steadied since Trump’s comments, responding well to the turbulence instigated by his policies. For the past week, it has maintained a value of around R18.1/USD. This is also due to a weakening of the dollar in recent months.
South Africa’s diplomatic response to Trump’s threats, perhaps being emboldened by the support of China, gave investors confidence. The introduction of proactive policies addressing domestic issues also supported the recovery of the rand.
This week, Trump imposed further sanctions by blocking $2.6 billion in climate funds, including a $500 million disbursement. The funds would have unlocked a further $2.1 billion from multinational development banks and other sources of finance.
Unfortunately for South Africa, the rand is particularly sensitive to external shocks, more so than the dollar. South Africa’s rand is historically an emerging market currency. This is a currency that belongs to a country transitioning from a low-income to a modern industrial economy. While the potential for high returns in emerging markets is attractive, it can also make the economy volatile, which tends to discourage investors.
SA is also estimated to have a budget deficit of 4.6% for 2025/26, widening from an estimated 4.3%.
Overall, the rand’s stability and capacity to recover during this period could be promising for investors. But it’s also possible that rising instability, on a global scale, will push investors towards safer, even safe-haven, assets. This, for example, is one of the reasons gold has excelled in 2025.
What’s Next?
The performance of the Southa African rand in 2025 will be shaped by both global and domestic factors. The financial conflict between the U.S. and SA shows no sign of slowing. However, the evidence points mostly towards SA further aligning with China and BRICS, and moving its dependence away from the U.S.
For the rand, it’s shaping up to be a turbulent year. At the moment, the rand looks positively stable, thanks to a solid response by South Africa and a strong recovery over the past two months.
However, the financial power behind the U.S. and Trump is significant. This is combined with the fact that Trump has shown no mercy when it comes to economic sanctions against countries who oppose him. Recently, he retaliated against European tariffs with a 200% tariff on alcohol imported from the EU.
Ultimately, the fate of the rand seems largely to depend on the willingness of Trump to impose financial sanctions on SA. For the moment, at least, policy reforms and support from China are keeping the economy stable.
This stability is put under pressure by the relationship between SA and China. China remains SA’s largest trading partner, and any economic or geopolitical challenges for China could also heavily influence the price of the South African rand.
According to FitchRatings, however, widening government debt and lack of collaboration in accepting the budget in 2025 so far may be seen as a lack of stability by investors. This in turn threatens a return to the rand’s crash of December 2024, when the rand dropped to lows of R17.66/USD.
Author: Sean Maguire
The editorial team at #DisruptionBanking has taken all precautions to ensure that no persons or organizations have been adversely affected or offered any sort of financial advice in this article. This article is most definitely not financial advice.
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