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Currently, the SARB has revised its forecasts downwards in response to rand appreciation and weaker economic growth. In contrast, Turnleaf’s model paints a more optimistic picture of growth, while also acknowledging that underlying price pressures are easing. A declining money market 3-month rate is providing signals of slowing price expectations and future credit loosening that could stimulate the economy (Figure 1).

Gold and Precious Metals: A Shifting Role

Typically, emerging market growth cycles track changes in metal prices. But with South Africa’s industrial growth weakening, this relationship is shifting. Metals are increasingly being treated as a strategic reserve and a pivot away from the dollar. Our model has picked up the Metals Price Index as an upward driver of South Africa’s inflation (Figure 2). Because South Africa is a major gold exporter, higher gold prices strengthen the rand by boosting export revenues, improving the trade balance, and providing macro stability during global uncertainty.

Rand Appreciation and Inflation Dynamics

Recent rand appreciation has made fuel and raw materials cheaper, keeping PPI muted across sectors. This has allowed firms to maintain healthier levels of employment, which through demand has helped support CPI, leaving manufacturers better positioned even as industrial growth slipped in July 2025.

At the same time, increases in municipal electricity prices by Eskom in July 2025 have pushed Housing and Utility CPI higher. However, continued rand strength has helped shield the broader economy during this period of strain, and further appreciation may mitigate future increases in administrative utility costs tied to dollar-denominated energy. That, in turn, could place downward pressure on the inflation curve.

Global Rates and Capital Flows

Shifts in global interest rates add another layer to the rand’s dynamics. The Fed’s recent rate-cut signals temporarily boosted appetite for high-yield South African bonds, offering additional support to the rand and lowering the cost of imports. Looking ahead, while the SARB is likely to hold rates steady through year-end amid a modest upward drift in inflation, a Fed cut could increase pressure to ease locally. That would normally risk weakening the rand and pushing up imported prices. However, continued strong global demand for gold through year-end is expected to provide a buffer, redirecting flows into the metal and supporting the rand.