In this week’s market review, TreasuryONE currency strategist André Cilliers reflected on the third iteration of South Africa’s budget, which was successfully tabled and adopted without the widely anticipated VAT hike. While this brings some relief, new tax adjustments—including fuel levy increases and the effects of bracket creep—signal a continued effort to close the deficit without bold structural reform.
Despite modest content, Cilliers emphasised that the most significant outcome is the political agreement that allowed the budget to pass without legal or parliamentary disruption. “The real win is that we now have a budget, and that gives the country room to move forward,” he noted.
Attention now turns to the South African Reserve Bank, with consensus leaning toward a 25 basis point interest rate cut later this week. Inflation remains below 3%, oil prices are declining, and the threat of U.S. tariffs has temporarily eased, opening the door for monetary easing.
Internationally, positive sentiment around U.S.-China tariff talks and a softer U.S. dollar are contributing to renewed support for the rand. Cilliers expects the currency to trade in the R17.75 to R18.50 band in the coming weeks.
South Africa’s recent diplomatic engagement in Washington, while theatrically underwhelming, signals ongoing dialogue between U.S. and SA leadership—another sign of geopolitical stability influencing local markets.