History of the Rand

About the South African Rand

The South African rand (sign: R; code: ZAR) is the currency of South Africa. The rand is subdivided into 100 cents (sign: “c”). The ISO 4217 code is ZAR, from Dutch Zuid-Afrikaanse Rand (South African rand). The rand is legal tender in the Common Monetary Area between South Africa, Swaziland, Lesotho, and Namibia, although the latter three countries do have their own currencies.

Historical users of the South African rand included South West Africa and the nominally independent Bantustans under the apartheid system: Bophuthatswana, Ciskei, Transkei and Venda.

How did the Currency came to be called Rand?

The rand takes its name from the Witwatersrand (literally “white waters’ ridge” in English), the ridge upon which Johannesburg is built and where most of South Africa’s gold deposits were found.

Exchange Rate History of the Rand to Dollar (1975 – 2000)

A rand was worth US$1.40 from the time of its inception in 1961 until late in 1971. Its value thereafter fluctuated as various exchange rate dispensations were implemented by the South African authorities. By the early 1980s high inflation and mounting political pressure combined with sanctions placed against the country due to apartheid started to erode its value. The currency broke above parity with the dollar for the first time in March 1982, and continued to trade between R 1 and R 1.30 to the dollar until June 1984, when depreciation of the currency gained momentum. By February 1985, it was trading over R 2 per dollar, and in July that year, all foreign exchange trading was suspended for three days to try to stop the depreciation.

By the time that State President P. W. Botha made his Rubicon speech on 15 August 1985, it had weakened to R 2.40 per dollar. The currency recovered somewhat between 1986–88, trading near the R 2 level most of the time and even breaking beneath it sporadically. The recovery was short-lived, however, and by the end of 1989, the rand was trading at levels more than R 2.50 per dollar.

As it became clear in the early 1990s that the country was destined for black majority rule and one reform after the other was announced, uncertainty about the future of the country hastened the depreciation until the level of R 3 to the dollar was breached in November 1992. A host of local and international events influenced the currency after that, most notably the 1994 democratic election which had it weaken to over R 3.60 to the dollar, the election of Tito Mboweni as the new governor of the South African Reserve Bank, and the inauguration of President Thabo Mbeki in 1999 which had it quickly slide to over R 6 to the dollar. The controversial land reform program that was kicked off in Zimbabwe, followed by the September 11, 2001 attacks, propelled it to its weakest historical level of R 13.84 to the dollar in December 2001.


Two generations of older notes and coins: The notes of the latter of these two generations (as depicted by the R5 note in this image) were replaced with the iconic “Big Five” notes and these were recently updated to show the face of Nelson Mandela.


Banknotes and coins of the South African rand’s fourth series (2005 – 2012)

This sudden depreciation in 2001 led to a formal investigation, which in turn led to a dramatic recovery. By the end of 2002, the currency was trading under R 9 to the dollar again, and by the end of 2004 was trading under R 5.70 to the dollar. The currency softened somewhat in 2005, and was trading around R 6.35 to the dollar at the end of the year. At the start of 2006, however, the currency resumed its rally, and as of 19 January 2006, was trading under R 6 to the dollar again. However, during the second and third quarters of 2006 (i.e. April through September), the rand weakened significantly.

In sterling terms, it fell from around 9.5p to just over 7p, losing some 25% of its international trade-weighted value in just six months. Late in 2007, the rand rallied modestly to just over 8p, only to experience a precipitous slide during the first quarter of 2008.

This downward slide could be attributed to a range of factors: South Africa’s worsening current account deficit, which widened to a 36‑year high of 7.3% of gross domestic product (GDP) in 2007; inflation at a five-year high of just under 9%; escalating global risk aversion as investors’ concerns over the spreading impact of the subprime crisis grew; and a general flight to “safe havens”, away from the perceived risks of emerging markets. The rand depreciation was exacerbated by the Eskom electricity crisis, which arose from the utility being unable to meet the country’s rapidly growing energy demands.

2012 – Currunt

A stalled mining industry in late 2012 led to new lows in early 2013. In late January 2014, the rand slid to R11.25 to the dollar, with analysts attributing the shift to “word from the US Federal Reserve that it would trim back stimulus spending, which led to a massive sell-off in emerging economies.” In 2014 South Africa experienced its worst year against the US dollar since 2009, and in March 2015, the rand traded at its worst since 2002. At the time, Trading Economics released data that the rand “averaged R4.97 to the dollar between 1972 and 2015, reaching an all time high of R12.45 in December of 2001 and a record low of R0.67 in June of 1973.” By the end of 2014, the rand had weakened to R 15.05 per dollar, partly due to South Africa’s consistent trade account deficit with the rest of the world.

From 9 December 2015 to 13 December 2015, over a four-day period, the rand dropped over 10% due to what some suspected was President Zuma’s surprise announcement that he would be replacing the then-Finance Minister Nhlanhla Nene with the little-known David van Rooyen. The rapid drop in value was stemmed when the President back-tracked and announced that the better-known previous Minister of Finance, Pravin Gordhan, would instead be appointed to the post. Zuma’s surprise firing of Nene damaged international confidence in the rand, with it experiencing significant exchange volatility throughout much of January 2016, reaching an all-time low of R 17.9169 to the US dollar on the 9 January 2016 before rebounding to R 16.57 later the same day.

The January drop in value was also partly caused by Japanese retail investors cutting their losses in the currency to look for higher-yield investments elsewhere and due to concerns over the impact of the economic slowdown in China, South Africa’s largest export partner. By mid-January, economists were speculating that the rand could expect to see further volatility for the rest of 2016. By 29 April, it reached its highest performance over the previous 5 months, exchanging at a rate of 14.16 to the United States dollar 

Following the United Kingdom’s (UK) vote to leave the European Union (EU), the rand dropped in value over 8% against the United States dollar on the 24th June 2016, the currency’s largest single-day decline since the 2008 crash.This was partly due to a general global financial retreat from currencies seen as risky to the US dollar and partly due to concerns over how the UK’s withdrawal from the EU would impact South Africa’s economy and trade relations.

In April 2017, a Reuters poll estimated that the rand would remain relatively stable for the rest of the year, as two polls found that analysts had already factored in a possible downgrade to “junk” status. At the time, Moody’s graded South Africa two notches above junk status. When president Jacob Zuma narrowly won a motion of no-confidence in South Africa in August 2017, the rand continued to slide, dropping 1.7 percent that day. In September 2017, Goldman Sachs Group said that the debt and corruption of Eskom Holdings was the biggest risk to South Africa’s economy and exchange rate of the rand. At the time it had no permanent CEO, and Colin Coleman of Goldman Sachs in Africa said the company was “having discussions on solutions” on finding credible management. In October 2017, the rand firmed against the US dollar as it recovered from a six-month low. Reuters noted that “South Africa is highly susceptible to global investor sentiment as the country relies on foreign money to cover its large budget and current account deficits.”On November 13, 2017, the rand “tumbled” over a full percent when the budget chief Michael Sachs stood down from his position in Zuma’s administration.


The Financial rand ( Abolished March 1995)

Four exchange control stamps in a South African passport from the mid-1980s allowing the passport holder to take a particular amount of currency out of the country. Exchange controls such as these were imposed by the South African government to restrict the outflow of capital from the country.

The South African financial rand was the most visible part of a system of capital controls. Although the financial rand was abolished in March 1995, some capital controls remain in place. These capital controls are locally referred to as “exchange controls”, although the system has since 1995 moved towards surveillance — recording and reporting to the authorities of foreign currency transactions — rather than control.

Capital controls have been in place in South Africa in various guises on an uninterrupted basis since the outbreak of World War II, when Great Britain and its dominions implemented the Sterling area.

Following the 1960 Sharpeville massacre, South Africa experienced significant outflows of foreign exchange on the capital account of the balance of payments and instituted an additional level of capital controls, known as the Blocked Rand system. This had the principal effect of blocking outflows of capital to the other countries in the Sterling Area, notably Britain.

To some extent the Blocked Rand system mirrored Germany’s Reichsbank system introduced under Hjalmar Schacht in 1937, called “aski” accounts — short for Auslaender Sonderkonten fuer Inlandszahlungen (“foreigners’ special accounts for inland payments”). In other words, creating a closed loop system that did not create a claim on the foreign exchange reserves of the Third Reich, or in this case South Africa.

The report of the De Kock Commission on Exchange Controls tabled in November 1978, proposed a gradual easing of exchange controls. This saw the replacement of the Blocked Rand by the Financial Rand in early 1979. In line with this policy, the Financial Rand itself was abolished in 1983 and non-residents could repatriate the majority of their South African investments via the Commercial Rand.

This easing was, however, short-lived and the Financial Rand system was re-introduced on 1 September 1985. The outflows during 1984–1985 were largely the result of economic sanctions in response to apartheid. At the same time, the government enacted the exchange controls. Investments in South Africa by foreigners could only be sold for financial rand.

The financial rand system provided for two exchange rates for the rand — one for current account transactions and one for capital account transactions for non-residents. Investments made in South Africa by non-residents could only be sold for financial rand, and limitations were placed on the convertibility of financial rand into foreign currencies. Financial rand had the ISO 4217 currency code ZAL. Financial rand had a previous life, from January 1979 to February 1983. The 1985 crisis coincided with a default (then called a “standstill”) on foreign debt by the apartheid government.