“I was tricked by an internet scammer posing as a hedge fund manager in Manhattan,” Wellington Mafuta recalls, dusting the clogged vent of a Wi-Fi router. “In reality, they were a thief in Mombasa, Kenya. They left my children with no breakfast.”
Wellington paused to scan his cellphone, stunned by how the #GameStop fiasco was roiling Wall Street. “The thief promised to trade forex online on my behalf but vanished with my $200 life savings,” he said.
Though a college-trained auto mechanic, the 43-year-old has somersaulted through a variety of professions over the course of his life. In recent years, he has forsaken greasy engines for the spirited world of foreign exchange trading, in which international currencies are bought and sold on a fast-paced open market.
He got into it after his own bad experience in the summer of 2014. Once he figured out that he had been scammed, “I stayed up till midnight studying forex-gaming manuals,” Wellington said. Then, he began trading. “I started with just $10, which I managed to raise to $50 in two days, and I grew that to $480 a week later.” He invested his profits in transportation and food processing, and, within two years, began offering his own free online forex classes. Then, one day, he realized, “Hey, Welly, you can wager your future on this.”
“Bossy Welly” as Wellington is colloquially known, estimates that he has coached about 2,000 wannabe traders over the past five years, though, at some point, he stopped counting. His students are mostly millennials, and some are as young as 14. The charismatic retired mechanic works out of his home in Mutare, a city of nearly 200,000 people with just five public internet cafés and ramshackle broadband internet, offering daily WhatsApp classes, capped at 250 people. “Each group gets a two-hour slot where I deliver my tutorials as text and images, give them extra reading materials, and invite questions,” he said. Welly’s free introductory course lasts a week, after which students are asked to pay $50 for a lifetime membership, which he refers to as “advanced training.”
Business has been good. “I make over $30,000 annually from forex trading now,” he revealed — a tempting figure in a country where public servants are paid some $177 a month. His earnings come mostly from his own trading, with student fees making up a small part. Currency trading has become a lucrative business in Zimbabwe for a number of reasons, some practical and some aspirational. For starters, there’s a low barrier to entry: in addition to a little capital, the only equipment needed are cheap smartphones, Chinese-made solar panels, and secondhand laptops, which traders use to access third-party trading platforms like MT4 and MT5 and other low-cost retail brokerages. To safeguard against Zimbabwe’s unpredictable power outages, serious traders will also purchase two internet service providers because “a $1,000 trade can go wrong in seconds.” Traders base their bets either on the basis of major news and analysis or on specialized financial websites.
Ease of access, however, doesn’t guarantee success. Forex trading can be a high-risk, high-reward endeavor, and Welly instructs his students to exercise prudence. “We make our profits from exploiting volatility,” he explains. “A student must trade when at least two markets are open because that is when there is the most volatility. There’s a steep learning curve — this isn’t a quick-money Ponzi scheme.”
But, despite the risks, there are an estimated 1.3 million online forex traders across Africa, and according to investigative journalist Yasin Kakande, 45,000 of these unlicensed traders are believed to be in Zimbabwe. If that is the case, it would make the country one of Africa’s fastest-growing informal online forex trade locations. In this, Zimbabwe, and the rest of the continent, is participating in an even larger trend.
Thanks to digital brokerages and trading apps like Pepperstone and OctaFX, small traders around the world are now able to access money markets that were historically too opaque, too expensive, and too highly regulated for anyone but large institutional players. Since hitting the market in the last decade, trading apps, with slick interfaces that share features with online gaming and gambling, have purported to make buying and selling forex simple. There are few reliable estimates of the absolute number of retail traders.
Although the apps and brokers promise “forex trading,” investors don’t usually participate in the currency markets directly but, rather, skim the surface using a riskier instrument known as a contract for difference, or CFD. A CFD is effectively a directional bet on how a currency will perform — simple to understand but risky to make. Forex markets are complex and sometimes volatile, and if the market turns, it is easy for an unfortunate trader to lose their whole stake.
Like online gambling companies, which have also spread widely across Africa and many other emerging markets, some forex apps and digital brokers operate in a legal gray area. Many are headquartered on Caribbean islands or in Cyprus — low-regulation jurisdictions that have historically hosted brass plaque financial companies that want to operate globally without scrutiny. This allows them to sidestep regulations that would normally prevent them from offering brokerage services in many countries, including Zimbabwe.
Their rise has gone in lockstep with that of financial influencers, individuals who offer trading tips via Twitter, Instagram, and Reddit forums or through groups on the messaging platform Telegram. Some have huge, global followings. The Singaporean forex coach Adam Khoo has 670,000 subscribers on his YouTube channel; Jon and Pete Najarian, NFL athletes turned traders, have more than 250,000 and 175,000 Twitter followers, respectively.
On Instagram in particular, those “signals” are accompanied by tantalizing glimpses of the traders’ lifestyles — fast cars, holidays in Dubai, and champagne yacht parties. Just how much of that is paid for by trading profits is unclear, and influencers usually make their money by selling private courses or learning materials or by offering premium access to trading tips for a fee. Others work on commission and are paid by brokers each time one of their followers opens an account. And in some places, the lure of forex trading is simply that it offers the possibility of a regular income.
Zimbabwe, a nation of roughly 15 million, is bound to an unusable currency. In 2000, the government embarked on a violent program to seize private farms from white Zimbabweans. As a result, the country’s agricultural, manufacturing, exports, and currency collapsed, hyperinflation set in, and the government began printing new bills and denominations to keep pace. Citizens started avoiding banks and holding their savings in U.S. dollars. In November 2008, the country’s inflation rose to the second-highest levels ever recorded, with monthly hyperinflation reaching 79,600,000,000%, according to Johns Hopkins University economist Steve Hanke.
In addition to this, Zimbabwe is also grappling with other structural problems. Only a fraction of its population is online, cash shortages are so dire that depositors sometimes sleep in bank queues, and despite having one of the continent’s best education systems, unemployment is so bad that frustrated millennials have been seen selling tomatoes in the streets wearing university graduation gowns. At the same time, the country is home to many savvy young people willing to experiment in evolving fields like cybersecurity, cryptocurrencies, and coding. Trader-mentors like Welly want to cultivate that talent and keep young people on the right side of the law. “We are introducing genuine online forex-trading lessons in Zimbabwe because our country also has its homegrown con artists,” he says.
The trouble is that, in Zimbabwe, forex trading still has to happen under the table. “High street banks in Zimbabwe flatly refuse to open global wire Visa/MasterCard accounts for anyone who confesses to being an online forex trader,” says Tabita Moyo, a 21-year-old university student and acolyte of Welly’s. That restriction makes sense to Edward Cross, a former advisor to Zimbabwe’s Monetary Policy Committee. “Zimbabwe does not have a currency that is fully convertible on the international market, so there has not been any justification to create regulation around online forex trading,” Cross told Rest of World by phone.
One effect of this is that it encourages Zimbabweans who are interested in forex trading to work with brokers operating overseas — which makes them more vulnerable to getting scammed. But experts such as Kipson Gundani, executive director of Africa Roundtable, a Zimbabwean group that lobbies for CEOs, say that this is simply a risk of doing business. “There is no law anywhere in the world to completely shield online forex trades from criminals,” he stressed. Some countries, including South Africa and Kenya have, however, established regulatory bodies to monitor online forex trading.
For now, traders in Zimbabwe have found workarounds to these institutional blocks. Many rely on digital wallets to route profits, said Moyo, who has used his $600 monthly profit to pay his college fees and install windows and an iron roof on his parents’ unfinished home. But even these aren’t always reliable. By October 2019, Skrill, the most popular digital wallet, suddenly restricted the opening of new accounts by Zimbabwe-based traders. “When the ban took effect, clever traders concocted fake residential addresses from neighboring countries like Botswana,” Moyo said. This didn’t work for long, he added. “Skrill noticed.” (In April 2021, Skrill will no longer service accounts for Zimbabwe-based traders, effectively pulling its services from the country.)
Other tactics are still in place. In one popular scheme, “online forex traders use their e-wallets to purchase groceries for locals in Zimbabwe electronically,” Moyo explained. “The beneficiaries then pay the forex traders offline with cash.” Zimbabwe-based traders have also been known to wire profits to friends or relatives living in Canada, South Africa, or Europe. The recipients, usually members of the diaspora, will then re-wire the money back to Zimbabwe via remittance services like Western Union, WorldRemit, or MoneyGram. According to the World Bank, the Zimbabwe diaspora is a critical source of tax revenue, responsible for sending more than $600 million a year to the country.
But these dynamics obscure the true state of affairs for traders on the ground. In practice, while Zimbabwe’s central bank has publicly warned online forex traders and black market currency converters to stop their dealings, trades are quietly tolerated. This has been especially true since the outbreak of Covid-19. At the peak of the pandemic in Zimbabwe, between May and July of last year, Welly said he registered an average of 750 new students each week, as curfews encouraged many workers to explore online money-making. Paul Wedza, a former student of Wellington, now has 310 students of his own. Working out of Harare, the capital, Wedza encourages his students to hone their trading skills through temporary accounts on brokerage platforms, before they start investing real money. He also reminds them to be mindful of bad actors. “International thieves still hover,” he laments, reflecting on a student of his who lost the first $300 he made in forex trading to a phishing scam.
As more and more Zimbabweans enter the underground forex trade, how well they do could depend on the quality of their mentorship. Like any good teacher, Welly reminds them to be cautious in their planning, and he stresses the importance of doing one’s homework. “Read up on basic economics,” he tells his students. “Be obsessed with global events; they move markets; markets move currencies. Whatever your excitement, never trade on emotions.”