Last year can be classified as a period of contradictory events, significant economic changes, and major political shifts. On a positive note, it was the year when global central banks finally managed to tackle inflation, partly induced by the negative and far-reaching effects of the COVID pandemic and partly by the more recent geopolitical events.
On a negative note, 2024 was a year of lingering political uncertainty and geopolitical instability. Although investors learned to coexist with the simmering conflicts in Eastern Europe and the Middle East, a sense of underlying unease persisted.
While these trends shaped economies worldwide, their ripple effects on South Africa’s financial landscape have been significant and complex. International financial broker Octa examines how these global shifts have influenced the rand, local industries, and the investment climate.
Currency dynamics
Central banks around the world eased interest rates after prolonged tightening the year before. This divergence in monetary policies created notable fluctuations in currency markets. The U.S. dollar emerged as the strongest performer, appreciating nearly 6% year-to-date against a basket of major currencies. Meanwhile, the Rand faced significant volatility.
On April 19, 2024, the USD/ZAR exchange rate peaked at 19.295, marking the rand’s weakest point against the dollar for the year. Conversely, on September 27, 2024, the rand strengthened, with the USD/ZAR rate reaching a low of 17.116. These fluctuations were influenced by global monetary policies and domestic economic factors, such as the South African Reserve Bank’s (SARB) cautious monetary approach.
“The relative strength of the US dollar is only one of many reasons why most other major currencies underperformed in 2024. Other factors, however, are specific to individual countries and a major bearish factor this year specifically has been the lack of political certainty, which currencies do not like,” says Givens Kgasi, a financial market analyst at Octa Broker.
For South Africa, a weaker rand presents a mixed bag. On the one hand, it boosts the competitiveness of exports, particularly in the mining sector, where elevated global gold prices provided a silver lining. On the other hand, the weaker currency has increased import costs, squeezing industries reliant on foreign inputs such as manufacturing and technology.
The SARB has been balancing inflation control with the realities of a challenging global environment. Notably, in November, the SARB reduced the repo rate by 25 basis points to 7.75%, aiming to stimulate economic activity while maintaining price stability.
Gold’s record-breaking performance and the mining sector
Gold has been one of last year’s standout commodities, reaching record highs month after month. The precious metal’s performance was driven by safe-haven demand amidst geopolitical tensions, central bank purchases as part of diversification strategies, and easing global monetary policies. South Africa, one of the world’s largest gold producers, has reaped benefits. Export revenues from gold have surged, providing much-needed support to the economy.
However, the mining sector’s challenges persist. Operational costs remain high due to the depreciating currency and rising energy prices, while geopolitical risks and regulatory uncertainties add to the industry’s concerns. Still, the global demand for gold continues to position South Africa as a critical player in the market, underscoring the importance of supporting this sector with favourable policies and infrastructure.
The cryptocurrency boom
Cryptocurrencies had a landmark year, with Bitcoin achieving milestones such as crossing the $100,000 mark. In South Africa, the adoption of cryptocurrencies has been on the rise, particularly among younger investors seeking to diversify their portfolios. Local exchanges reported a surge in trading volumes, and businesses increasingly explored blockchain technologies to enhance efficiency.
Most of the gains in the crypto sphere were in response to Donald Trump’s victory in the US presidential elections. Such a favourable market reaction to Trump’s victory stems from investors’ belief that his Administration, coupled with a friendly Congress, will effectively deregulate the crypto industry, facilitate its expansion, and implement a coherent regulatory framework that will serve investors and consumers for years to come.
“It should be said that this belief is not without foundation. Trump has managed to lure many crypto fans to his side with his bold moves, clear views, and a strong focus on deregulation,” says Kgasi.
However, challenges remain, including the need for consumer protection measures. The SARB has taken steps to clarify its stance, signalling a cautious but open approach to integrating digital currencies into the financial system. This aligns with the broader global trend of finding a regulatory balance that fosters innovation while mitigating risks.
South Africa’s strategic responses
South African businesses and investors have shown remarkable resilience in adapting to these global economic changes. Exporters in high-demand sectors like gold have capitalised on favourable commodity prices, while others have turned to hedging strategies to mitigate the impact of currency volatility. Diversification has become a key theme for investors, with increased interest in offshore assets and alternative investment opportunities.
Meanwhile, sectors dependent on imports, such as manufacturing, have faced considerable pressure due to rising costs. Businesses in these industries have had to explore innovative ways to streamline operations and manage supply chain disruptions. Some companies have turned to local suppliers and alternative materials to reduce dependency on imported goods, showcasing adaptability in a challenging environment.
The SARB’s monetary policy decisions have played a critical role in maintaining economic stability. While global trends have leaned towards rate cuts, the SARB has adopted a measured approach, focusing on inflation targeting and currency stability. This cautious stance has helped anchor investor confidence despite external pressures.
Lessons for 2025 and beyond
South Africa’s experience underscores the importance of agility in navigating a volatile global landscape.
For policymakers, aligning domestic strategies with global trends while addressing local challenges will be crucial. For businesses, leveraging opportunities in export markets, embracing innovation, and managing risks will define success in the year ahead.
In an interconnected world, the interplay between global and local dynamics is inevitable. By understanding and responding to these shifts, South Africa can position itself to thrive amidst uncertainty and harness the potential of emerging opportunities.
