In the African region Forex regulations remain one of the most-discussed topics due to the fact that not a lot of countries there have appropriate regulations. While it is true that Forex trading is a popular activity, only a few countries have a trustworthy trading environment. These countries include Kenya and South Africa where CMA (Capital Markets Authority) and FSCA (Financial Sector Conduct Authority) ensures that the financial sector is safe and stable.
The biggest local currencies include South African Rand and Kenyan Shilling, with ZAR being the eighth strongest currency in Africa. KES is one of the most traded currencies in the region along with Nigerian Naira, and others. However, it might not be an easy task to find a lot of Forex brokers offering accounts/currency pairs in a lot of African currencies.
As for leverages, there are not a lot of restrictions but few financial regulatory bodies such as FSCA allow traders the maximum leverage of 200:1. Leverages can often cause traders huge losses – The industry’s standard is somewhere between 200:1 and 300:1, and we do not recommend going above that, especially with unregulated brokers.
Forex trading is taxable in most countries and the African region is not an exception. Generally, customers are subject to Capital Gains Tax, however, the situation may vary from country to country. For instance, traders that make a profit from trading in South Africa have to pay taxes ranging from 18 to 40%.
African traders can easily have access to the most popular payment methods such as debit/credit cards and e-wallets but M-Pesa still remains the absolute favorite due to the fact that it is very simple to use. With the help of M-Pesa, clients can easily transfer money through mobile devices without access to an internet connection.
Considering the fact that the Forex industry is becoming more and more popular in Africa, a lot of brokerage companies come into the scene. That’s why some people might find it difficult to choose the best one. However, South African regulated brokers remain some of the best options in the region. We prepared the list of best African Forex brokers which provide the most desirable and competitive trading conditions to their clients. Check out the list below.
CySEC, FCA, ASIC
MT4, MT5, WebTrader
CySEC, CBI, FSA, FFAJ, BVI FSC, FSCA, FSRA
MT4, MT5, WebTrader, AvaTradeGO
SVGFSA, FCA, DFSA, FSCA, FSA
From 30% to 100%
Risk Warning: YOUR CAPITAL MIGHT BE AT RISK
FCA, CySEC, FSA
MT4, MT5, WebTerminal
ASIC, CySEC, FSA, BVI
WebTrader, MT4, TradingView
ASIC, SCB, CMA, CySEC, FCA, BaFin and DFSA
MT4, MT5, cTrader, TradingView
FCA, CySEC, DIFC, CIMA
WebTrader, MT4, MT5, IRESS
MT4, MT5, WebTrader
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Between 74-89% of retail investor accounts lose money when trading CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
African Forex market is regulated and fortunately, there are no strict limitations imposed on trading. The majority of countries such as South Africa and Nigeria have their own designated regulatory authorities, whereas the rest of the states rely on the neighboring governmental organs for regulating the market. None of the existing regulatory bodies allow or approve trading with unregulated and non-licensed brokers. Similarly, you are not allowed to trade for someone else in any of the countries. The list of some of the most recognized and influential regulatory bodies that regulate the top 10 Forex brokers in Africa include:
The Financial Sector Conduct Authority is the most recognized, valued, and trusted regulatory agency in South Africa. Previously, the FSCA was operating as the Financial Services Board which contributed a lot to developing the advanced Forex trading scene in South Africa. Nowadays, the authority monitors and controls all types of financial activities in the state. The FSCA receives and resolves any disputes coming from the traders in regards to specific brokerage companies registered with the regulator. Therefore, obtaining a license from the Financial Sector Conduct Authority may not be that easy for the brokers. The main responsibilities of this financial regulatory body include:
The Capital Markets Authority in Kenya obliges by law all the brokerage firms to register with the regulator and obtain an official license from it. The law applies to all types of brokerage companies, including Forex brokers. The regulations imposed by the authority were first enforced back in 2016. Before the legal framework appeared in the country, traders were facing major criminal cases, frauds, and scams, which urged the government to regulate the financial market. The CMA is now authorized by the government to enact the laws and monitor the market to ensure the transparency and security of African Forex traders. The regulatory organ of Kenya is built upon the recommendations from reputable authorities worldwide like the Australian Securities and Investment Commission or the Financial Conduct Authority of the United Kingdom.
The Central Bank of Nigeria regularly issues the guidelines on Forex trading and even authorizes certain dealers for foreign exchange market operations in Nigeria. The acts devised by the Central Bank of Nigeria are highly liberal in their nature and focuses on stabilizing the foreign exchange market as well as the activities in the inter-bank market. There are multiple sanctions against the brokers in Africa that violate the guidelines of the CBN. For instance, in 2020 alone, 300 companies have been sanctioned for not being licensed in Forex business, or for selling their services to unauthorized buyers.
The main regulator of the capital market in Tanzania is the Capital Markets and Securities Authority. It is a governmental agency that was established in 1994 in compliance with the Capital Markets and Securities Act. The regulatory body directly reports to the Minister for Finance. The responsibilities of the institution include regulation, promotion, and the development of various capital market industries in the state. It also has launched numerous public awareness and educational campaigns throughout recent years. Furthermore, the CMSA is licensing and regulating Forex brokers and investment advisors. It is also designing various principles for the guidance of the foreign exchange industry and issues the plans to protect the investor’s interests and guard the market against potential abuses.
The Bank of Uganda remains a significant role-player in the development of the Forex industry of Uganda. BOU is the central bank of the country and operates since 1966. Despite the fact that it is fully owned by the government it does not represent the governmental department. One of the primary functions of the bank is to license and authorize the brokerage companies that meet the requirements set in the corresponding financial act of the country. All Forex bureaus in Uganda are required to submit an application of the registration with the BOU and pay annual licensing fees, while also allowing the regular audits of the company.
Trade with FSCA-regulated broker – AvaTrade
As we already mentioned, Forex trading is taxable in most countries in Africa. The tax rates mostly depend on your revenue and it is hard to tell which one might be the best for you. However, we are going to discuss some of the major countries and how they decide to tax their traders.
All the traders in Nigeria have a flat rate of 10% tax which is not very likely to change. For example, if your annual revenue is $50,000, you will have to pay $5000 to the government. A lot of people living in the country think that trading with an international company will free them from taxes, however, as long as you stay within the borders of the country and have profits, you need to declare them as taxable income.
Compared to Nigeria, taxes might go higher in South Africa. The tax rate can rate from 18 to 45%, once again, depending on your revenue throughout the year. To make things more clear, let’s take an example. Let’s say that your annual income was above 656,601 ZAR (which is approximately $46,000) – in that case, you will have to pay 585,783 ZAR plus 45% of taxable income above 656,000 ZAR.
Forex traders in Tanzania are subject to income tax that can go up to 15%. In case your total revenue was more than Tshs 12,000,000 you will have to pay 13.05% plus 30% of the amount above Tshs 12,000,000.
The best and most-used regional currency pair in this region is ZAR. South Africa generally offers a lot of possibilities for investment, due to the fact that the size of the state is quite big, with more than 50 million people in the population. The national currency of the country – South African Rand is considered strong and stable and the majority of reputable brokers we know – such as XM Group, HotForex, and IQ Option, offer accounts/currency pairs in ZAR, which is a good possibility for you to start your trading journey.
Other than ZAR, African people can enjoy trading with the Kenyan Shilling which is one of the most traded currencies in Africa along with the US Dollar, Nigerian Naira, and others. This is due to the fact that over the last few years KES remains one of the most stable currencies in the east side of Africa – along with that, compared to local currencies of countries being nearby, it is a stable option for trading purposes.
If you are not a fan of African currency pairs, we can recommend you to start trading using USD on the best Forex brokers in Africa such as AvaTrade and XM Group. Both of these brokers gladly accept clients from the African region offering some of the best trading features available on the Forex market.
Not a lot of countries in Africa have leverage caps due to the simple fact that you will not be able to find many official financial regulatory bodies across the region. However, it does not mean that there is no cap on leverage at all. As we already mentioned in the beginning, FSCA restricts leverage to 200:1 meaning that brokerage companies licensed by Financial Services Conduct Authority will not be able to go for higher ratios.
CMA also restricts traders from leverages higher than 400:1, which is above the industry’s average and can be quite risky for newcomers and less-experienced traders.
If you are someone who does not love taking risks and prefer to trade in a safer and calmer environment, we advise you to go for lower leverages somewhere between 200:1 and 300:1. That way, you will not have to worry about negative financial consequences that can be triggered by using high leverages.
At the moment, there is numerous payment option that works with the leading Forex brokers in Africa, but sadly not all of them are supported in each of the African countries.
The list of the most popular payment options across the African continent for Forex traders includes Visa/Mastercard card payments, bank wire transfers (though some banks limit the cooperation with the brokers), Skrill, Neteller, Paypal, and M-Pesa. All of these payment methods are recognized worldwide and are incredibly secure for traders. However, there will be various fees and charges associated with individual payment methods. For instance, for the withdrawal, there might be 1-2% charges along with the fixed fees up to 2USD payable. Some of the payment methods might offer free withdrawals and deposits but with several working days waiting time. The instant payment execution always comes at a cost.
The absolute favorite of the top African Forex traders is the M-Pesa payment system. It is the African payment solution provider which has built a very strong reputation on the Forex and securities trading markets. The M-Pesa platform is one of the most user-friendly and simplistic terminals for payments along with the extra security features available. The traders can have a mobile e-wallet with M-Pesa and easily manage their transactions on the go, at any moment. Numerous brokerage companies are supporting M-Pesa deposit and withdrawal options, too.
There are certain nuances that you should definitely check for in every brokerage firm that you encounter. South Africa, along with Kenya, and Nigeria are well-established for Forex so it might be a good idea to start your trading journey with them. Tanzania is one of the places which is taking its baby steps and has quite a big potential.
So, the first and the most important one is the regulation. We already discussed the most notable regulatory bodies in Africa. Therefore, African Forex brokers that you find should hold the license from any of these regulatory bodies. If you decide to go for the international brokers then having a license from one of the foreign regulatory authorities works perfectly, too. But, double check your broker’s license within the database of the regulatory organ as some of the brokers might lie about their regulations.
Back in 2013, there was a company called Platinum Forex in South Africa created by Colin Davids, who claimed that all traders would receive a 48% return on their investments. While it is true that this percentage is very high and suspicious, a lot of clients took this opportunity and were tricked into a scam scheme. The owner of this fraudulent company was able to gain more than R100 million.
Another great problem in South Africa is that over 50% of scammers find their victims on social media – that’s why we advise you to stay away from anything that is unlicensed and offers unreal numbers. Always check the legitimacy of the company or individual, otherwise, there is a high chance that you will lose the money that was supposed to be an investment for trading.
We always recommend that you dig deep into the website of the broker that you choose. First of all, you might encounter some of the opportunities that you do not want to miss as a trader. For example, many of the brokers will offer promotional campaigns and bonus programs that you can benefit from. In fact, some of the most successful Forex traders in Africa got rich by starting with minimal funds and later doubling up their deposits thanks to the promotional schemes designed by the brokers. Secondly, you should look for the demo account option and start trading with virtual money first. Later, you can always switch to the real trading account.
To make sure that you are familiar with all the basic features of Forex and are ready to start trading, we recommend you read our guides for beginners, as well as strategies that can help you perform better.
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