In what is maybe the most overdue podcast in the world, we speak to Fortress Core CEO and Co-Founder Dany Mawas about the South Africa forex broker market.

Dany has been based in South Africa for a decade and was previously Managing Director for Africa at FXCM. More recently he was Global Head of Retention at INFINOX and the CEO of Africa for Finalto.

We talk expanding into Africa, what mistakes brokers make there, new regulations, and more. You can listen via the buttons below or read a synopsised version of our conversation.

Today we have what I think is the longest‑in‑the‑waiting episode of this podcast I’ve ever done. We recorded one almost 12 months ago and it was never released. I’m happy to have Dany Mawas back. Dany is the co‑founder and CEO of Fortress Core. So Fortress Core is a full suite of products if you want to grow or start a broker or prop business or anything else, right?

Exactly, Fortress Core specialises in tech and liquidity. We provide anything and everything needed to start your own shop – a broker, prop firm, crypto exchange, or anything else. 

We take care of everything in three to four weeks, from A‑to‑Z. We provide all front‑end and back‑end systems and liquidity. Fortress Core is in close partnership with ATFX Connect. Fortress Core provides the tech, and ATFX Connect – the B2B arm of ATFX – provides the liquidity.

I saw you recently made a partnership with TradeLocker. So a broker or prop setting up with Fortress Core, the default is that they’ll have TradeLocker as their platform, right? 

Correct, so TradeLocker comes with TradingView, it’s fast, customisable, and it has different platforms, for mobile and desktop, in one price package. So it’s that pricing convenience and the TradingView access that we really like. 

Having said that, we are platform agnostic. If you want to set up or plug in your existing operations to our systems, we can do it, whether you’re using cTrader, MetaQuotes, or any other provider.

You’ve been based in South Africa for over a decade. You were FXCM MD for Africa and Finalto CEO for Africa. Can you talk about general trends you see at the moment? From my perspective, I see that brokers are either getting a local license for global business and treating it almost like an offshore license. Or they are going there because they want to use it to target the local market and wider African region.

South Africa became a trendy licence and region because if you succeed in retail B2C here, you’re likely to want to tap into other African markets. But it’s a tough market. There are unwritten rules and regulations new entrants don’t know. 

So I would say there are three trends at the moment. Firstly, the South Africa regulator now requires brokers to deal with a local ODP institution for market making. Many used offshore setups before, like the Seychelles, Mauritius, SVG, onboarding offshore but marketing locally with an FSP license. That is no longer accepted. Regulators are asking who your ODP is. Without one, you’ll need a solution fast. If you’re coming to SA, get an FSP and sign with a local ODP because you are going to get hit badly otherwise.

The next part is really around assumptions about Africa. People assume they can spend a lot on marketing and it’s just going to work. It doesn’t. You need experienced people on the ground to make it work and it’s a lot more of an IB-driven market. 

On that point, in South Africa at the moment, there are a lot of toxic partners asking for big upfronts, retainers, high rebates, and so on. You can easily spend a lot without any return with these guys. And if you stop paying, they move their book. So today the IB market is very toxic in South Africa. When people are asking for $15/lot, in my opinion, it’s unrealistic.

The final point is that success in South Africa is a good stepping stone for Africa but it’s not some guarantee you’re going to do well. Every market has huge nuances, whether it’s language, culture, payments, banking, currencies, and so on. You need to have a dedicated team in each place otherwise it’s very unlikely you’re going to succeed.

I have noticed some brokers getting a South African FSP license and no offshore licence. They often restrict South African clients. So is that a thing? And will bad things happen to brokers that do that?

Some try it, but the FSCA is catching them. Retail brokers get audited and inspected. Regulators understand MT4/5 and broker operations very well. If they find you’re running a book with only an FSP, you’re at risk of being shutdown, directors being fired, and so on. We are seeing many unregulated brands come to South Africa though, particularly via expos, trying to sign IBs. So it’s interesting times.

If I have an FSP, can I run a matched‑principal book, or do I need an ODP?

Regulators know how brokers operate. I would really advise against doing that. The ODP regime exists for a reason. With an FSP you must use a local ODP to run the book. Yes you can technically use offshore but approvals and flow are complex. Your best option is to get an FSP license and partner with an ODP holder.

If you look at the FSCA’s website, you can see a lot of firms withdraw their application. Why does that happen?

Usually that’s strategic – it’s better to withdraw than to have a black mark on your record, that your application was rejected.

But what I know also happens is that firms assume it’s easy to set up here. It’s not. So they get to the application stage and may also realise, ‘actually, this is not a walk in the park’ and stop the process.

Most brokers now focus on emerging markets. South Africa and Africa as a whole fit in the latter camp. Do you see brokers bombing when they try to enter South Africa and, if so, why?

All the time. Many come and leave within six months. As I said, a lot of firms think they can pump a lot into marketing and it’s going to work. We saw one firm recently try to enter and blow about $2m on marketing with no results. 

The main point is to work with people who get this market, particularly if you’re a pure play CFD broker with a third-party platform. If you fit that mold then you need good people on the ground, not to just blow a lot on marketing.

If you look at South African, or the wider region’s, per capita income, it’s low. So is this market just a numbers game? Or are there wealthy individuals there too?

Africa has a strong gaming culture. There are some studies which I believe show gaming products, like sports books, are people’s biggest recreational expense. So there is appetite here for trading.

It is often a quantity game, you have small deposits but large volume. But there are wealthy individuals here too. To reach them you need that local approach, you need the right product, and so on. A big part of that is personal meetings and trust. At least in South Africa, clients with bigger deposits want to have that personal experience.

I know you’ve said that being successful in South Africa doesn’t guarantee success in other African countries. But South Africa is still the main economy and regional hub in Southern Africa. So if you succeed in South Africa, do you get spillover into neighbouring countries? I have seen IBs active in smaller countries, like Botswana, for example.

Not really to be honest. It’s the same as here. You need to find local partners who can help you expand into each country. A lot of the time that can happen quite randomly. You go to an event, you meet someone who is based there or who knows someone who is. It tends to work that way. You don’t just start seeing a lot of deposits from Namibia, just because you’ve done well in South Africa.

You mentioned toxic IBs. I have also seen some regulation covering influencers in South Africa. What is happening with IBs and do the regulators care if you’re operating as an IB?

The market for IBs is toxic because a lot of them know that they can demand huge sums of money up front, because so many firms are desperate for business. And when that does not happen, the IB just moves on to the next player. I think brokers just need to be realistic. Is it really going to work if you’re offering $15 per lot, swap free accounts, and so on?

With regard to regulation, the FSCA is now looking at things like copy trading, providing signals and so on. This can be regulated activity.  We have systems in place to help brokers monitor their IBs activity. But the simple answer is yes, they do care – otherwise they wouldn’t make regulation covering that activity.

You launched Fortress Core over the last 12 months. A lot of the time it feels like people believe this industry is going to die. Obviously you’re in the business of helping firms get set up. So is this industry dying or do you see people wanting to start firms? And is that activity more in Africa or is it global?

We started in South Africa just because I am based here but we are a global business. We now have five white labels in South Africa, as well as others in Asia and LATAM. We’ll be expanding into French-speaking markets soon too.

The key for us is actually tech. We are 4x cheaper than some of our peers and can get you set up in 2 to 4 weeks. People are often pessimistic because of thin margins, which arise from expensive technology. We don’t have expensive technology so that can help support businesses a lot. 

Who are your clients? 

It’s mixed. Many are successful traders and IBs who want their own shop. They want control of trading conditions, and their own brand. Others are asset managers entering brokerage. We also support crypto exchanges. We give access to liquidity and systems. 

Fortress Core doesn’t just help you start a broker, we also have technology, liquidity and other products for existing firms. We see demand for those services as well.

Prop is big in Nigeria and synthetics seem big across many African markets. What’s going on there?

Prop is massive in South Africa as well and a key reason for that is cost. If you can get a $20k account for $50 – or whatever it is – that is naturally going to be more attractive to someone with less money.

It also appeals more to that gaming element. There is very game-y component to prop trading that people here like. 

For synthetics, it’s somewhat similar. People like the gaming side of it. You can also trade large sizes with a small amount of money. But the other part of that is it’s 24/7 trading and it’s a quick result. You know, ‘ok, in 30 seconds, I’m going to win or lose’ and that’s it.

We are actually seeing a new model of synthetics prop firms come to market. It’s early stage so it will be interesting to see how that plays out.

link: https://tradeinformer.com/interviews/how-to-make-your-forex-broker-business-work-in-south-africa-with-dany-mawas-and-fortress-core