• York Investment & Finance

Global Markets Overview: Africa


By Rory Ellis, Analyst at the York IFS Global Market Telegraph


This report will cover how South Africa coped with the largest cryptocurrency worldwide scam of the past year and what it has affected the investors’ confidence, and shed light on the worst economic performance in the South African economy for over a century.


The South African government has come under strong criticism due to their lack of regulation towards the cryptocurrency market. It comes after data firm Chainalysis recently named the South African based Mirror Trading International’s (MTI) as the biggest crypto investment scam in the world for 2020 [1]. MTI is currently being investigated after it was liquidated in December 2020, after claiming they had bitcoin worth about $740 million [2]. Before the liquidation, customers were beginning to complain that they were unable to withdraw their money from the fund, and have subsequently lost their investments.


The scam has led to a collapse in the South African regulatory system with key exchanges now moving their headquarters out of the country amid the uncertainty. Following such, Revix, an investment management company specialising in cryptocurrency, moving their offices from Cape Town to London. Their CEO stated that the South African authorities ‘have been incredibly slow in terms of regulation in the industry… leading to businesses looking internationally’ [3]. The lack of regulation has highlighted the growing differences between key African economies and other developed nations that deal with cryptocurrency; both the UK and Singapore recently moved quickly to ensure tighter regulation in the ever-changing and complex cryptocurrency markets.


The diminishing confidence in the government and their lack of regulatory measures follows the news that the South African economy contracted by 7% in 2020 [4]. This represents the most substantial contraction in over a century. The South African government implemented a strict national lockdown at the start of the pandemic; despite such measures, there have been over 1.5 million COVID-19 cases, causing chaos and havoc throughout the country. It is worth noting that even before the devastating effect of the pandemic, the country had previously seen a decade of stagnant growth and IMF bailouts. The huge decline in economic growth has meant that the government is planning to make cuts in the social welfare budget [5], which is seen as crucial in helping the most impoverished. Analysts specialising in the region are scratching their heads as to how the third-largest economy in Africa will be able to get out of the dire economic and political situation the country has found itself in.


This article was first published in the University of York Investment and Finance Society's Global Market Telegraph (GMT) Edition 4 in late March 2021.


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Reference list:

[1] https://go.chainalysis.com/rs/503-FAP-074/images/Chainalysis-Crypto-Crime-2021.pdf

[2] https://businesstech.co.za/news/banking/463518/bitcoin-under-scrutiny-as-south-africas-largest-alleged-ponzi-scheme-is-probed/

[3] https://www.bloomberg.com/news/articles/2021-03-08/crypto-havens-lure-firms-fleeing-regulator-angst-in-south-africa

[4] https://www.bloomberg.com/news/articles/2021-03-09/south-african-virus-hit-economy-shrank-most-in-100-years-in-2020

[5] https://www.ft.com/content/cd52f3ba-0372-4393-a6a0-5497b52b35a5

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