January 29, 2021

Development of Forex in South Africa

South Africa has been seeing increasing demand for forex trading, and COVID-19 is only accelerating its growth. Today, the country boasts an enormous army of retail traders, rising demand from investors, expansion of brokerage services, and adequate regulation. Here is a look at the main developments so far.

As trading is done remotely through platforms and apps, it is a lifesaver for many people. Due to the virus containment efforts, many businesses have shut down. However, foreign exchange is still accessible. It is the largest financial market worldwide, where over 6 trillion US dollars circulates every single day.

South Africa Leading the Way

Even before the pandemic, in 2019, the country had the largest forex trading volumes on the continent. It was estimated that over 190,000 retail traders resided in South Africa. It was partly attributed to the country’s robust and well-regulated financial sector.

The country is increasingly appealing for foreign investors, and the financial literacy of the population is also growing. Today, global brokers like ForexTime provide a plethora of educational resources free of charge. Traders may learn from articles, video tutorials, webinars, blogs, etc. Copy trading is another essential advantage of ForexTime in South Africa.

On average, residents of South Africa deposit $742.04 trading through retail platforms. This makes them an attractive audience for international firms. As a result, many well-known brands are now tailoring services to the needs of the local population.

What Instruments Are Traded

Currency pairs are not the only option available to South African traders. Other instruments like spot metals and assorted CFDs are also popular. It is estimated that in 2019 the total trading volume of CFDs and spot trading reached $2.21 billion per day, while the total daily FX volume across all instruments amounted to $20.37 billion.

Importantly, local traders have access to exotic pairs combining South African rand with the US dollar. At the moment, the local currency is the most traded one in Africa, and also the 18th most traded globally. Retail traders monetize their knowledge of the local financial market, as they can trade exotics effectively.

Overview of Regulation

The country is appealing to both traders and brokerage firms. This is partly explained by its strong regulatory framework. Unlike Nigeria, where the market is still largely unregulated, South Africa has well-organized regulations.

The biggest role in this regard is played by the Financial Sector Conduct Authority (FSCA), which is also a well-respected regulator on the continent. This organization is the successor to the Financial Service Board (FSB). It has the power to issue licenses to brokers operating in the domestic market. So far, the entity has licensed over 1,000 companies.

Why Forex is So Popular

The popularity of forex trading is not limited to South Africa. Around the world, millions of people engage in buying and selling currencies. Trading is appealing to the younger generation as it provides financial freedom. Besides, the key advantages are:

  • accessibility and cheap entry (live accounts can be opened with $10);
  • the versatility of trading platforms that may be installed on any device;
  • efficient support from regulated brokers;
  • wide range of financial instruments and the possibility of diversification;
  • free educational resources and demo accounts;
  • freedom to choose and build trading strategies;
  • a colossal global community of like-minded people.

Another contributing factor is the acceleration of internet penetration. Today, the country is still falling behind European nations. Still, it has made considerable progress since 2015, increasing penetration by over 20%.

Popular brokers provide VPS services that prevent trade interruptions. Technical glitches and system crashes may cause unexpected results. However, a virtual private server stores a copy of every client’s machine, which is running 24/7 regardless of external disruptions. It is particularly essential for areas where the internet connection is volatile.


Trading and COVID-19

The global pandemic has stimulated interest in online trading around the world. Due to the demise of many companies and conventional opportunities, alternatives like forex are in great demand. They allow consumers to work from home or even on the go. All they need is an internet-connected device, powerful software, and knowledge of the markets.

Before the crisis, South Africa was already leading the way in terms of forex trading turnover. Now, due to soaring unemployment and sweeping economic restructuring, the trading community is only going to expand. In the future, forex trading in South Africa will continue going from strength to strength.


About the author 

Peter Hatch

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