Cost of living: South Africa vs. the World

Cost of living: South Africa vs. the World

Stes de Necker

While South Africans often complain about the rising cost of living in the country, it remains one of the most affordable countries in the world.

This is according to new data from Deutshe Bank, looking at world prices for a number of goods and serves in terms of purchasing power.

The 2015 report follows indices like the Big Mac Index closely, but covers a far wider selection of goods than simply the famous McDonalds burger.

The Big Mac Index – which is also included in DB’s research – is based on the theory of purchasing-power parity (PPP).

This is the notion that, in the long run, exchange rates should move towards the rate that would equalize the prices of an identical basket of goods and services (in this case, a Big Mac burger) in any two countries.

The Bic Mac is selected for comparison as the popular fast-food meal is widely available across the world, and remains fairly consistent in pricing; however, it is by no means an exact science.

DB’s research covers more items, including the relative cost of living across 20 countries, car rentals and hotel rooms, as well as specific goods such as Coca Cola, beer, sports shoes, Levis jeans and Apple iPhones.

Prices in New York City are used as the standard measure, and all other prices are listed by city, where applicable, relative to NYC.

Global cost of living

Along with other emerging markets, South Africa has seen relatively large shifts in consumer prices – over 6% – between 2013 and 2014. This is an increase on par with economies like Brazil, India and Russia.

In relative terms of purchasing power parity, however, the cost of living in South Africa is just over 44% of that of the United States, showing relative affordability.

On the flip side, however, this trend of affordability in South Africa is notably shifting.

According to DB, in 2001, Johannesburg was the third most affordable city measured on the index. Fast-forward to 2014, and the South African city has disappeared from the top 10 completely.

Cost of living 2001 vs. 2014 Top and Bottom 10

“In previous years, Australia had consistently been the world’s most expensive country while the United States had been the cheapest developed country,” deutsche Bank said.

“This year, however, the strength of the USD has significantly narrowed the gap between the two. Similarly, shopping in Europe and Japan now feels a lot cheaper than before.”

Brazil was the most expensive emerging market in the world and was more expensive than the US for several categories.

However, currency depreciation has brought Brazilian prices more in line with what one would expect for a country at its level of development.

India remains the cheapest major economy in the world across a range of products.

Relative price levels by PPP

South African prices

In its report, Deutsche Bank measures countries across a basket of goods, looking at multiple cities where possible.

Two South African cities were featured: Cape Town and Johannesburg. Here is how South Africa’s averages compared to the New York standard, as well as how Cape Town and Johannesburg fared, head to head.

Item	Cape Town price	Johannesburg price	South Africa average
Petrol (1 litre)	143%	143%	143%
iPhone 6	126%	126%	126%
iPhone 5S	120%	120%	120%
VW Golf 2.0 TDI	99%	102%	101%
Levis	93%	106%	100%
Five Star Hotel rooms	109%	64%	87%
Sports shoes	86%	86%	86%
Coca Cola	56%	56%	56%
Taxi trip	48%	63%	56%
Economist subscription	51%	51%	51%
Men’s haircut	51%	45%	48%
Big Mac	46%	46%	46%
Car Rentals	42%	42%	42%
Movie ticket	31%	37%	34%
Gym membership	32%	35%	34%
Beer	27%	26%	27%
Public transport	20%	27%	24%
Marlboro cigarettes	22%	22%	22%

According to the data, South Africa’s highest relative charge is for petrol, where the country pays 143% the relative value of a litre of petrol in New York.

On the other end of the spectrum, vices such as smoking are more affordable in the country, where a pack of cigarettes is only 22% of the relative value in the States.

Looking at the cities, of the 18 items, Cape Town and Johannesburg differed in price in nine – six of which had higher prices in Johannesburg.

Education, dates and holidays

Using Harvard as its standard, DB also analysed business school tuition fees and salaries offered to graduates across the world.

In South Africa, tuition fees at Wits and UCT were only a fraction of those at Harvard – 14% – but with an average starting salary of US$43,556 for graduates, South Africa ranked lowest for pay.

In it’s “cheap date index”, Cape Town offers the 7th most affordable night out, with date costs amounting to only 40% of the same night in New York.

Johannesburg prices amount to 47% of NYC’s prices.

A cheap date consists of taxi rides, McDonalds burgers, soft drinks, two movie tickets and a couple of beers.

The weekend getaway index, which looks at a two night stay at a 5-star hotel, four meals, snacks and car rentals, among other things, also works out to be relatively cheap in South Africa.

Cape Town prices work out to be 89% of the New York values, with Johannesburg prices even cheaper at 61%.