SA’s currency, inflation and rate gains constrained by state intervention
The 2025-2026 Christmas and New Year window saw the usual flood of crazy news. Topping the global charts was the United States military incursion into Venezuela to ‘grab’ President Maduro and his wife and bring them back to New York to face drug charges. Closer to home, South Africa’s financial consumers were treated to alarming developments in the fields of electricity and medical schemes.
TDS goes both ways
Your writer is not going to take the bait offered by the Trump Derangement Syndrome (TDS) sufferers flooding social media platforms, except to say that both haters and lovers of the US President appear to be afflicted.
Instead, this op-ed seeks out issues that affect South Africa’s citizenry. On the plus side, we enter 2026 with benign inflation, fuel prices in decline and the rand on the front foot versus the dollar, euro and pound. On the minus side, government foreign policy remains a trifle adversarial, while state-owned enterprises (SOEs) and private sector rent-seeking threaten recent cost-of-living gains.
Articles documenting the rand’s 2025 turnaround and 2026 prospects are dime a dozen at present. Moneyweb.co.za led with ‘Rand jumps to three-year high’, while Businesstech.co.za weighed in with ‘Great news for the rand in 2026’. “The rand has marked one of its best years in recent memory in 2025, with economists expecting the good times to keep rolling in the new year,” the second-mentioned news brand wrote. “The rand has entered the final weeks of 2025 trading well below R17.00 to the dollar, having broken through the psychological resistance level and maintaining its position.”
Dollar-rand volatility was also reported at its lowest level in over two decades. Various reasons were given for the currency’s resurgence, starting with low inflation and prospects for further US interest rate cuts and continuing with a narrower-than-expected domestic budget deficit in December 2025, the country’s removal from the FATF grey list and the credit rating upgrade from S&P Global. Commenting in the Business Tech article, Investec Chief Economist Annabel Bishop offered a base case for the rand at around R17.00 per dollar, weighed down by low economic growth and structural constraints. The group’s upside is R16.00 to the dollar.
The new inflation norm
Elsewhere, economists have hinted that local consumers might benefit from three further interest rate cuts through 2026, totalling 75 basis points.
Your writer spotted a handful of articles promising a quite-specific R839.00 per month ‘win’ for homeowners if this three-cut scenario plays out. One article featured Izak Odendaal, an Investment Strategist at Old Mutual Wealth, who said South Africans would have to get used to the idea of inflation at around 3%. The South African Reserve Bank (SARB) recently announced a shift from the long-standing 3-6% inflation target range to a 3% anchor with a one percentage point tolerance.
Lower interest rates and a stronger rand should keep inflation in check, but there are a couple of red flags that might worry FAnews readers. Brokers and financial advisers will be justifiably concerned by rumblings around Eskom SOC Limited, which remains a ticking bomb for inflation despite celebrating 231 days of uninterrupted power supply. PS, your writer is not moved by this news and would argue that the absence of official load shedding is moot in the context of the many power outages that continue to affect parts of the country.
Why a ticking bomb? The answer crystallises from another Moneyweb.co.za article titled ‘NERSA consults on R76 billion additional revenue for Eskom from your pocket’, read in conjunction with the state-owned power utility’s recent oversupply admission. In short, NERSA is positioning for an additional R76 billion in electricity tariffs following its failed attempt to push through a R54 billion hike in July last year. Stakeholders have until 21 January this year to make submissions on the tariff proposal, with a final decision set down for month end.
Electricity inflates at a different rate
What this means for you, dear reader, is that your and your clients’ April 2026 electricity price increase are likely to run well ahead of the SARB inflation anchor mentioned earlier. But let’s forget about all the back and forth on regulated tariff setting and consider the following points.
First, Eskom was idling through December and January with around 13 MW in oversupply, suffering a major revenue hit due to subdued electricity utilisation. Second, major industrial users of Eskom power are shutting down one after the other, unable to trade sustainably at current electricity prices. And third, Eskom’s headcount remains virtually unchanged over the past decade despite challenges, with the average salary cost now exceeding R1 million per annum and rising. The point here is that Eskom does nothing to control the cost side…
Little wonder readers are incensed by the R76 billion demand. One respondent to the aforementioned article ranted about the faux green shoots of Eskom’s well-publicised recovery in the context of R500 billion in bailouts, R310 billion in cost overruns on the Kusile and Medupi builds and electricity price hikes of more than 2 000% over the past three decades. Another came closer to defining the core problem, arguing that “without the market mechanism of supply and demand, where voluntary consumers and suppliers interact in mutually beneficial exchange, there is no way to determine a correct, rational or optimal price for electricity.”
Allow your writer to expand on this observation with a brief comparison. In the private sector, a power provider understands that demand declines as prices rise, and that revenue must be maximised at the optimal intersection of affordability and consumer demand. Staffing levels, remuneration and other operating costs are assessed against this constraint. By contrast, Eskom operates on an unconstrained cost-to-supply basis. It can simply demand a price exceeding its operating costs, making no effort to reduce headcount, limit new hires or restrain remuneration.
Privatise this centrally-planned mess
The solution, succinctly shared by the commentator, was to privatise the centrally-planned mess. Alas, the private sector has its flaws too. One example, which first came to your writer’s attention on LinkedIn, concerns member reimbursements in the private healthcare insurance space, more specifically in the medical schemes environment. An article published in The Citizen offered the back story. It appears that a mistake in how certain prescription and over-the-counter medicine claims were processed by Discovery resulted in reimbursement errors in consumers’ favour throughout the year, which the medical scheme is now seeking to claw back.
There is no excuse for this oversight, but the private sector can be defended more broadly in light of how highly regulated the medical schemes industry is. The entire system begs a redesign to restore supply and demand fundamentals. Consumers should not tolerate a pricing regime that is based on the principle of ‘what the payer can afford’ rather than what the good or service costs to supply. As for the healthcare regulators, shame on you. The focus, for decades, has been on chipping away at private healthcare common sense to pave the way for a seriously flawed centralisation of healthcare under the public services banner.
Another year like every other
So, will South Africans enjoy a year like no other in 2026? The early signs are not promising. As things stand readers will have to endure another year of encouraging macro indicators being weighed down by economic constraints and political dysfunction. Any improvements in the currency, inflation outlook and your client’s share portfolios will simply be eroded by the persistent meddling of an elected but self-serving officialdom.
But don’t take my word for it, dear reader, just look at what is happening in electricity, healthcare, logistics, manufacturing, mining and ‘insert your preferred industry here’. Absent accountability across both public and private sectors, South Africans will once again find themselves paying more for less in 2026.
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