Navigating SA’s highly regulated investment environment

The news that South Africa’s Intergovernmental Fintech Working Group (IFWG) is moving to regulate the country’s cryptocurrency ecosystem has many investors concerned, coming as it does in a very depressed economy ravaged by harsh Covid-19 restrictions and job losses. How best, then, to ensure your hard-earned investments are safe?

Online stock trading coming of age

Trading of stocks via brokers online has also seen its share of ups and downs in the country as several fraudulent and questionable actors have been operating in this space for some time, offering unrealistic returns and services not sanctioned by their trading licences. What is more, Finance Minister Tito Mboweni has had cause to warn the public against unregulated offshore forex brokers operating in South Africa.

The Financial Sector Conduct Authority (FSCA) has been working tirelessly to weed out these illegal operations. While legitimate trading platforms in South Africa are beginning to flourish as—much like in the rest of the world—a younger generation of retail traders using social media, online platforms, and mobile apps begin trading successfully on global markets, undeterred by the GameStop short-selling saga. Credit Suisse has reported that retail trading as a share of global market activity has nearly doubled to over 30% since the start of 2020.

Tried, trusted, and newcomers to market

In South Africa, EasyEquities has seen a steady increase of 1,000 to 2,000 new users per day, according to Carel Nolte, chief marketing officer, while eToro allows South African users to invest not only in stocks, but also cryptocurrencies, exchange traded funds (ETFs), currencies, indices, and commodities around the world. Highly regarded world-wide, TD Ameritrade offers trading with no minimum cash deposit, but does require South Africans to open a US bank account.

Newcomer Khwezi Trade counts 12 500 clients and provides each with a segregated bank account, which avoids pooling of funds as happens in cryptocurrency trading. Its most popular traded instruments are the Nasdaq, gold, oil, and the Euro/US dollar currency pair.

“Many of the overseas brokers entering SA mislead the SA market, using social media to market themselves. I would say one of our unique attractions is that we are a local broker, which means any complaints can be handled by the Financial Services Ombud, though we are proud of the fact that we haven’t had a single complaint referred to the Ombud since inception,” says Mark Wurr, co-founder of Khwezi Trade.