The currency market offers viable opportunities for profit. Over the past few years, the population of Africa has embraced internet-assisted trading. Between 2013 and 2016, the volumes grew from $14 billion to $21 billion in South Africa alone. The segment is only projected to expand.
The interest in currency exchange is obvious. Now, during the pandemic, more and more consumers are becoming traders. Through local and international brokerage firms, they connect to the international marketplace and monetize knowledge.
The activity has gained traction in different parts of the continent: Nigeria, Kenya, Namibia, Angola, Tanzania, Rwanda, and Botswana. Well-established brands adapt their offerings to the local population. Today, there are cent accounts for modest initial deposits, and the South African rand is included in exotic pairs.
Key Contributing Factors
According to the latest estimates, the mobile Internet is actively used by 50 million people in the subregion. Despite the gradual economic recovery, unemployment is a serious problem for the young: around a third of them are out of work. The appeal of Forex trading is thus obvious.
Many firms attract clients through advertisements on social media. The promotion has recently intensified. The rapid spread of online trading is facilitated by specific features of the region. The number of traders in South Africa is growing due to:
- Decent Internet penetration (expected to grow to 85% by 2023);
- Severe unemployment;
- Affordability of entry for individuals;
- Aggressive marketing.
Internationally recognized brands, such as Alpari, cater to the needs of local clients. Opportunities are similar to standard services abroad: locals may trade on margin, choose different currency pairs, and access more complex tools. Aside from currencies, it is possible to buy and sell different CFDs:
- on stocks,
- on market indices,
- on commodities,
- on cryptocurrencies.
Top firms provide clients with educational material and open demo accounts for training purposes. The range of proven Forex trading strategies is broad: newbies may learn from the experience of experts. They receive comprehensive guidance and support at every step of the way.
There are two groups of intermediaries: local and foreign. Currently, global brands outnumber home-grown enterprises. Many of them are based in Europe. Since the recent EU policy changes, they have zoomed in on the African continent.
In the past, Europe was the largest Forex market. In 2018, brokers were prohibited from offering generous leverage conditions over 30:1. It is no longer possible to offer binary options and bonuses, which has caused Forex to lose part of the appeal.
Given its generally lax regulation and economic peculiarities, Africa presents vast opportunities for the businesses. Regulatory oversight is particularly weak in Nigeria. This emphasizes the importance of dealing with a licensed company, as fraud is not uncommon.
The Securities and Exchange Commission (SEC) was open about the problems, admitting in 2018 that “until a framework for the regulation of online retail Forex trading is developed by the SEC, any person participating or engaged in such investment activity does so at his or her own risk.”
South Africa: Tighter Controls
Here, the market is better regulated. FSCA (the Financial Sector Conduct Authority) has been taking measures to counteract fraudsters. All local Forex brokers have to acquire an official license. This is referred to as the Over the Counter Derivative Provider (ODP) license. The companies have an obligation to provide the regulator with unhindered access to information concerning all transactions. For each client, this data includes:
- name and country of residence;
- instruments used;
- underlying assets;
Prospects for Currency Traders
In the future, South Africa is expected to welcome increasing numbers of international brokers. The opportunities presented by internet-assisted trading are especially salient now when the global pandemic has confined millions of people to their homes. Meanwhile, changes in fiscal policies of developed countries, such as Australia, boost the appeal of the African continent.
The key issue is the lack of regulations. Local traders are advised to choose global brokerage firms with official registration and years of proven experience. Aside from licensing, international brokers should be supervised by credible entities, such as CySEC.
In Nigeria, Forex fraud is common due to the absence of controls. Distinguishing between legit and fake websites may be challenging. South Africa provides a positive example, as its authorities are making efforts to manage the industry.
How to make money with forex in South Africa
In any market, preparation is the key. You must have a reliable backup before entering the forex market. Forex is the most significant business in finance, and making money in it is not easy. In South Africa, you can enter the world of forex by following a few simple tips.
- Online connections: In the present time, every business is available on the internet. You can manage your work from the vicinity of your house if you have an internet connection. Make sure you have a continuous internet connection as the forex rates change every second, and you don’t want to be left behind in any terms.
- Carry Trade: You can make money by the everchanging forex rates. You can keep currency in the forex and hold it. Once you have held the money, it will act as a bank for your future. You can gain an interest in it. There is a distinct difference in the interest prices of every currency, and this gap will make you earn money.
- Shorting the currency: Everything depends on the way you estimate the value of any currency. If you can predict that the cost of a particular currency might deteriorate later, you can gain profit from that. Sell that currency at an increased price so that you can purchase it in the future when it is available cheaper.
- Funding is essential: As many business personnel believes that you need money to earn money. Before you step foot in the market, make sure that you have a secure bank account. You must connect this account with your business. You can start funding through virtual money also.
- Binary trading: You can also make money by predicting a specific currency’s price at a given time. If your desired price is available for currency on a given date, you can profit from it. You might also lose money if the price is lower than the desired one.
South Africa has emerged as a leading market in forex. The country has attracted many investors around the globe. South Africa has organized firm rules for the local brokers and has uplifted the market demand amongst the investors. Also, South Africa allows investors from other African nations to invest in their market, and the clients are free to indulge in the South African Forex. The entry of European brokers explains the popularity of South Africa’s business module.