How investment culture is destroying South Africa’s youth - Baltimore Post-ExaminerBaltimore Post-Examiner

How investment culture is destroying South Africa’s youth

Investment culture is a relatively new phenomenon in Africa. It mostly refers to people being obsessed with making money with money. Basically what it means is that people take their life savings and speculate with them on the financial markets.

Similar to what you’d see on Wall Street, but on a much lower level. People on Wall Street speculate with just 1% of their Net Worth which is still sometimes worth millions of dollars, but in South Africa, it’s easy to see people invest almost 100% of their Net Worth in a single trade and end up broken beyond measure.

The reason for such a culture taking place is still being investigated by the local government, but it can’t be said that it’s completely negative. It’s mostly split 50/50 for investors that lost it all, or investors that got it all.

However, even though the number of wealthy people grew, it widened the income inequality gap even further.

South Africa’s financial background

Before we look into the spreading of investment culture in South Africa, we need to take a look at the economic situation of the country before the whole trend started gaining momentum.

Starting in the early 2000s, South Africa was riddled with economic inequality, unemployment, and serious human rights issues. Young South Africans who would finish school and be classified as skilled workers would still struggle to find decent-paying jobs. The reason was very simple.

The jobs that were available for college graduates seemed to be enough for a single person or a couple, but taking care of the whole family, which meant around 5 people that depended on the income of just one was simply too overwhelming.

Young people who couldn’t afford college or didn’t have the will to go were finding themselves simply unemployable, thus drowning further and further into poverty.

However, according to 55brokers thanks to South Africa’s close affiliation with countries such as the United Kingdom and the Netherlands, the country saw quite a lot of foreign companies setting up shop locally.

Multiple of those companies tended to be financial exchanges such as Forex brokers, and various other entities.

Sooner or later, these companies started seeing the potential of the South African market (mostly due to the rich elite) and started to promote their brands locally. However, once getting almost every above-average income person to sign up, the companies saw even more potential of tapping into the country’s youth or people with decent jobs.

Because of this, they started offering easy gateways to the markets, things like the bonuses were incentivizing enough for people with no knowledge or experience in trading to sign up and try their luck.

Based on Forextime South Africa in most cases, it was completely harmless. The companies would give this bonus to new customers and allow them to lose it on their first trades. However, some became hooked on the activity and started to deposit their own funds.

Influencers and affiliates

The moment when investment culture started was when young people from poor backgrounds started to make fortunes on the market. Most of the time it was just lucky bets or the smallest amount of research to reach these levels.

Some of the lucky ones were even using their university tuitions to speculate on the currencies, ,  even cryptocurrencies markets. Most failed to see any tangible profits, or even worse, lost it all and had to drop out of school.

But those who did make a fortune, around 1% of investors, managed to not only make millions of dollars but country-wide fame as well.

After seeing very young people generate millions without too much effort on the surface, many South African youngsters started to believe that this was a perfect way to get rich quick. Therefore, around 2010-2014 thousand if not tens of thousands of South Africans started to speculate with their savings as well as crucial tuitions for studies.

Financial companies in the country realized this and started incentivizing affiliate programs, which constituted an influential person or a website promoting a specific company’s services, thus getting a lot more people to sign up.

Sometimes, it was even enough to say that the influencer was simply registered on a specific company’s platform.

The promotion these influencers were giving to these companies earned them millions more in profit, which was seen as something even more desirable for the youth. Money and fame became the biggest dreams in South Africa and still are.

Has this gone out of control?

The level of participation in financial trading was more or less getting out of hand in 2015-2016. So much so that the government was forced to introduce some kind of filtration system for the traders before they could truly access the financial markets.

There was no real restriction though, but the idea was revolutionary nonetheless. In most of the cases, traders would avoid any deliberate seeking of financial education simply because it was behind a paywall. The government tasked the local regulator to simply give out financial education for free.

This included basic knowledge such as how economies work, what tools to use when trading, how to calculate risk and etc.

It’s been working swimmingly ever since. The idea was so good that the government even managed to increase its popularity with traders.


About the author

COMMENT POLICY

Comments are closed.

HOME / ABOUT / CONTACT / JOIN THE TEAM / TERMS OF SERVICE / PRIVACY POLICY / COMMENT POLICY