The Rand 2022

17 January 2022 By PDSNET

It is that time of year when various experts feel it incumbent on themselves to make predictions – especially for the progress of the rand during 2022. Of course, the strength of the rand is a vital component of any private investor’s analysis because so many of our shares have significant interests overseas or are engaged in exporting.

Nedbank’s pessimistic forecast for 2022 is that the rand will weaken to below R18 to the US dollar and will average R16.01. BNP Paribas, which is the local arm of a French banking Group, predicts that the rand will weaken by a further 7,5% during the year. They are predicting a major slowdown in the South African economy due to further load-shedding by Eskom and rising local interest rates.

Our view is markedly different. We have long held that the rand is significantly under-valued against hard currencies. We believe that its performance is predicated by two primary factors:

  • Our propensity as a country to “shoot ourselves in the foot” economically, by unnecessarily introducing uncertainties into the business environment and by demonstrating a lack of social discipline (as happened with the civil unrest in July 2021).

  • The state of international investment sentiment. This sentiment oscillates between “risk-on” and “risk-off” depending on whether overseas investors are scared by developments in the world economy, or confident of continued growth. When they are confident, they seek the real rates of return available in emerging economies. When they are scared, they move out of emerging economies and back into “safe havens” like US Treasury Bills.

We have a few reasons for thinking that the rand will appreciate this year. Consider the charts:

South African rand/US dollar: July 2017 - 14 January 2022. Chart by ShareFriend Pro

South African rand/US dollar: 2 November 2021 - 14 January 2022. Chart by ShareFriend Pro

The upper chart shows the progress of the rand/US dollar exchange rate from July 2017 to date. The lower chart shows the detail of the current position, (as represented by the red box in the upper chart) from November 2021 to date.

As you can see the rand has been in a weakening trend since June 2021, partly because of internal factors like the July unrest and the ANC’s poor showing in the elections and partly because of periodic shifts to “risk-on” among international investors.

Since the beginning of December 2021, however, the rand has been appreciating as confidence in the US economy increased and in the absence of any economic disasters locally. The strong performance of commodity prices with the concurrent improvement in the national debt have done much to restore confidence.

On a purchasing power basis, the rand is reckoned to be about 7% undervalued, but we believe that it has the potential to strengthen further than this. While load-shedding and the pandemic are certainly negatives, the world is awash with cash which is looking for the high real rates of return offered on our government bonds.

Right now, extraordinarily, inflation in the US is about 2% higher than here in South Africa - while the yield on their 10-year treasuries is just 1,75% against the yield on our long bonds at over 9%. We see more investment cash coming into this country and the rand strengthening continuously – provided, of course, that our esteemed leaders can refrain from economic suicide.  


All information and data contained within the PDSnet Articles is for informational purposes only. PDSnet makes no representations as to the accuracy, completeness, suitability, or validity, of any information, and shall not be liable for any errors, omissions, or any losses, injuries, or damages arising from its display or use. Information in the PDSnet Articles are based on the author’s opinion and experience and should not be considered professional financial investment advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional. Thoughts and opinions will also change from time to time as more information is accumulated. PDSnet reserves the right to delete any comment or opinion for any reason.

Share this article:


Bitcoin versus Gold

Cryptocurrencies cannot really be considered an investment because they have no fundamentals. Their value is derived exclusively from the belief of the people who invest in them. When belief in Bitcoin is strong the price rises and when it is weak, the price falls.

Bitcoin cannot be regarded as a “safe haven” asset


Most investors would probably agree that there is a considerable amount of uncertainty in equity markets at the moment. From a fundamental perspective, that uncertainty has come about because of:

  1. The force with which the central banks of the world (especially the US Fed) will “stamp on the brakes” to reduce

Powells Punch

In November last year we wrote the following about the U.S. economy in the Confidential Report:

…what if the Fed is wrong about inflation and it persists at the current high levels or even increases? September was the 5th month where inflation was above 5%. If they are wrong, then they will need to raise interest


Nineteen months ago on 2nd of September 2020 in the Confidential Report, we recommended buying Lewis shares when they were trading for just 1668c. The share has now moved up to 4670c – a gain of 180%. Amazingly, it remains excellent value today despite this substantial rise in its price.

The company has 817 stores with 84%

Linear vs Semi Log

Most charts of share prices or indexes that you will come across are linear. The date is measured on X-Axis (horizontal) and the price or index level is measured on the Y-Axis (vertical). For short term charts linear scales are fine, but the longer your chart, the more misleading a linear chart becomes, especially for data streams which generally increase over


In recent times there has been a trend for investment holding companies to unbundle their assets into the hands of shareholders, thus releasing substantial value. The shares of investment holding companies traditionally trade at a significant discount to the market value of the assets which they hold, and this provides them with an opportunity to


Throughout history, in times of war or major crisis, investors have always sought a safe haven for their wealth. And that safe haven has inevitably been gold. The various assets available for investment can be arranged in order from the highest return and most risky to the lowest return and least risky. On that scale, gold is on the one extreme –

Buying Opportunity

Investors don’t like uncertainty, but investment is about predicting the future and, of course, that is all about assessing the impact of an array of uncertainties. As an investor you have to use your analysis, experience and understanding to reduce the level of uncertainty to an acceptable place.

Uncertainty is reflected in volatility.


There can be little doubt now that inflation world-wide is gaining momentum. America recorded 7,5% in January 2022 and Europe had inflation of 5,1% in January 2022 which is expected to rise to 5,8% in February. If that happens it will the first time for many decades that I can recall inflation being higher in both Europe and America than it is here in South Africa.


When you buy shares, you are immediately in the business of forecasting the future. You believe that the shares you have bought will go up. If you thought that they were going down, you wouldn’t have bought them. Your prediction that the share will go up can be divided into two primary areas – the prediction that the share market as a whole will rise (systematic)