Without question, South Africa is Africa’s most developed country and a member of the G20. Its financial operations are supervised by the local Reserve Bank (this issues the national currency, the ZAR, or rand, among other things).
Despite having various naturally occurring resources such as valuable metals, it heavily relies on commerce with Europe, the United States, and Asia.
South Africans have accepted currency trading because of their open economy. With over $20 billion transacted in 2018, they are Africa’s most important currency market. Namibia, the number two country, has only 10% of South Africa’s currency trading volumes.
The South African rand, the country’s currency, is ranked 19th in terms of global trade. As conditions for forex brokers targeting European traders become more difficult, many of them are turning their attention elsewhere, and South Africa is becoming more enticing as it offers both a stable economy and inexpensive operational costs.
South African Forex Rules
Local traders have access to Forex trading, which is both legal and widespread. The FSCA (Financial Service Conduct Authority) supervises forex trading, ensuring that investors and brokers do not engage in illegal behavior.
To advertise their financial operations to South Africans, non-African brokers must be FSCA-licensed. They must also meet the regulatory body’s operational capital requirements and have a principal office in South Africa.
Brokers who provide securities like Contracts for Difference (CFDs) must also verify that their clients can handle the associated instability. The Johannesburg Stock Exchange also offers derivative securities to local dealers. Before permitting their clients to trade such risky products, they should carefully examine them. South African investors can also trade currency exchange derivatives on the JSE.
While residents are not prohibited from trading on non-FSCA-licensed overseas brokerage platforms, it is strongly advised that they choose brokers who have at least one license in a primary jurisdiction (such as the UK, Cyprus, or Australia).
Traders will find it a lot easier to fund their accounts if the broker has local authorization. Dealing with overseas brokerage firms can be more difficult because you are dealing with foreign banks and, as a result, currency changes.
Although funding using a credit or debit card is convenient, a standard wire transfer is safer. It allows you to send a larger amount of money, primarily if the broker is abroad. Finally, brokerage providers that allow you to open a ZAR-based account should be preferred (rather than an account in USD or euros). This is to avoid incurring extra currency conversion fees.
Financial Regulations in South Africa
A dual regulation regime was implemented in South Africa a few years ago. Two separate bodies have been established, each with its own unique supervisory mission.
The FSCA regulates financial service companies, such as forex brokers, and approves which firms are allowed to operate inside the jurisdiction. It is responsible for the issue of licenses and has the authority to penalize companies that break national regulations.
South Africa’s PA, or Prudential Authority, is the other regulatory agency. Except for banks, they keep an eye on financial institutions. This entity’s principal responsibility is to oversee non-bank financial organizations such as the capital markets, cooperative investment firms, and financial giants.
The Reserve Bank of South Africa completes the picture by performing specific functions: ensuring the stability of the region’s capital sector, issuing the local ZAR currency (both bills and coins), and regulating the country’s gold supply.
Transferring Funds to a trading account in South Africa
It should be simple to fund your FX account with your first deposit. Most traders use a local bank transfer or a conventional credit card to do so.
The amount of money that South Africans can send to a foreign location is limited (999,999 ZAR per year). Traders that want to invest more merely need to get a tax exemption. Alternatively, you can invest through a local broker, which eliminates the need for cash to be sent outside.
E-wallet transfers from operators such as Neteller, Skrill (previously known as Moneybookers), and the much-maligned PayPal are now accepted by South African brokerage businesses. These have the advantage of being speedier than a bank transfer while still maintaining a prominent level of fund security.
EasyEFT is a newer local service that allows you to transmit money directly from your bank account. This process can be started directly from your brokerage account; simply seek out your bank using the portal and fill out and complete the required information. Many banks, including Investec, FNB, Standard Bank, ABSA, and Capitec, embrace this safe and speedy approach.
South African Brokers Trading Software
To trade currencies, you’ll need to get a South African forex trading platform from your forex broker’s webpage and install it. It’s safe to assume that by 2020, all trading software will allow you to add technical analysis to your charts (great for analyzing price action). It’s also realistic to presume that all brokers in South Africa provide free demo accounts, allowing you to test the software’s capabilities and interface in real-world market situations while using virtual funds. Demo accounts are also used by many professionals to test out new strategies or fine-tune their trading techniques.
Most brokers offer either the MT4 or MT5 (MetaTrader) platforms, or both. This is the most widely used trading program in the world, and its popularity stems from its user-friendly design. The distinction between the two versions is straightforward: the former is only for trading currency pairs, whilst MT5 additionally supports other types of assets (futures, shares, commodities, precious metals, indices, etc.).
Smartphones are now used by over half of all South Africans to connect and conduct online transactions. Brokers have responded by providing mobile versions of Metatrader, allowing traders to buy/sell currencies and monitor their holdings no matter where they are. The Android and iOS operating systems are both supported. Traders can use these apps for free and get access to most of the functionality found in the desktop versions.