FOREX market in Africa started when, in London, Zitulele Combi, an executive chairman, stumbled on the idea of setting up a foreign currency (FOREX) trading business. With no knowledge of the FOREX business except that a traveler needed it and that he was using it every day, he persuaded the manager of a London FOREX booth to provide a crash course in FOREX in return for information on the political changes in South Africa.
After that crash course, Combi returned to South Africa and after further extensive research and a host of meetings he became the first black dealer to be awarded a foreign exchange license by the South Africa Reserve Bank.
And then, thanks to him, Master Currency was born, this company has captured about 10 percent of the South African FOREX market and is still growing, it also operates from 16 branches in Cape Town, Durban, Johannesburg and Pretoria.
Despite these efforts, trading in the FOREX market on the African continent is not an easy job since their currencies are in the exotic currency classification and the market does not have the same amount of activity for exotic currencies as for the major currencies.
What do exotic currencies mean?
It is usually considered as exotic currencies to those that come from less developed countries to the western ones. This is the case of the currencies of African countries such as the Rand of South Africa, which is the legal currency of South Africa, identified by the symbol ZAR.
The South African Rand also circulates in countries close to South Africa such as Namibia, Swaziland, and Lesotho, which are part of the Common Monetary Area of southern Africa. As a result of hyperinflation, the currency also circulates through Zimbabwe.
These currencies are gaining popularity recently because of the opportunities they offer and more and more are those that operate with them. On the other hand, it is advisable not to operate with people with little experience in the FOREX market due to the higher risks that they entail.
Trading Exotic Currencies.
The way to trade with these exotic African currencies is different from trading with major currencies since the level of interest in exotic currencies by investors is lower. The lack of activity in the exotic currency market causes a high cost, in addition to high risk.
Exotic currencies are less relevant in the FOREX market than FOREX majors (US dollar, euro, pound sterling, Swiss franc and Japanese yen) and secondary currencies (Australian dollar, Canadian dollar, New Zealand dollar). However, it also has its share and relevance in the FOREX market.
All these currencies are traded with the US dollar in a currency pair since the dollar is the reference currency. Not to negotiate against the dollar, which would be unlikely by brokers, we would be faced with a crossed pair that would generate higher spreads and costs than if we did it, due to the low liquidity they have.
Obviously, the operation with exotic currencies is more complicated since the market of this currency will not have as much activity or be so dynamic so there will be less supply and demand at the prices we want to operate with them.
This means that exotic pairs have much less liquidity when compared to FOREX majors.
Risks of Exotic Currencies.
Exotic currencies, being less traded by FOREX traders, will have less trading volume. Therefore the spread between purchase and sale price will tend to be higher than that of the main pairs. This also implies a greater risk of the operations that we carry out.
The greater risk of these currencies, which normally come from developing countries, this is because the less information relative to the factors that determine the economy of that country and therefore that currency will be more difficult to access and obtain.
As is evident, the foreign exchange market in Africa has a long way to go and is in somewhat murky situations; it is possible that the future will be better for these currencies.
Many industry leaders are working hard on that. There is this event called the African FOREX Expo: Africa Blockchain, Cryptocurrency, FOREX, CFDs& Financial Conference & Exhibition Expo. That takes place yearly in Johannesburg, South Africa.
It is a two-day event for traders, investors, fintech companies, brokers, affiliates and IBs from across Africa and the world.
With the fast-growing financial market in Africa, it is expected that this expo will drive to improve and exponentially develop the FOREX market through a range of free seminars and an exhibition of FOREX products and services.
This is an opportunity that traders should not miss, especially Africans to promote their platforms and get direct access to the most exciting FOREX market in Africa. Thousands of attendees are expected at the two-day high impact event.