While the rand has lost a fair chunk of its value against major global currencies over the past few months, there are still destinations where South Africans command stronger buying power.
While currencies in countries like Mexico and the Czech Republic trade within the same range as the rand – at 1.1 and 1.6 times the currency’s value – in South Korea and Colombia, a single rand gets you 78 won and 208 pesos respectively.
Aside from what seems like a myriad of local issues impacting the rand – it, along with other emerging market currencies, has taken a beating in 2016 due to a global market slowdown, and a slump in demand for commodities.
This has pushed the rand towards record lows against the US dollar, though the currency has more recently settled at around R15.35 in March.
And yet despite its turmoil, the rand is still stronger than a number of countries – however rand strength means little if it doesn’t carry the same buying power.
BusinessTech pulled the relative prices from the 2016 Big Mac index, which measures how the purchasing powers of countries differ based on the price of a Big Mac, which is typically priced consistently around the world.
Note: the prices below are not intended to compare quality of living, but rather purchasing power of South Africans travelling to the destination countries on a tourist/business level.
The Economist, which launched the Big Mac index in 2009, notes that the index isn’t a “hard-science” measurement of purchasing power parity, but serves as basic enough model to highlight the global positioning.
|Country/Currency||Value of ZAR1.00 in local units||Big Mac (local units)||Big Mac (ZAR equivalent)||ZAR purchasing power (%)||PPP value of ZAR1.00 in local units|
|South African Rand||1.00||28.00||28.00||100%||1.00|
|South Korean Won||78.49||4300.00||54.78||51%||40.03|
*McDonald’s closed in Iceland in 2009, the Metro Burger equivalent has been listed
Despite a favourable exchange rate, in most cases what you would pay for a Big Mac in South Africa would not be enough to buy a Big Mac in many other comparative countries.
Put another way, in terms of purchasing power, countries that appear to have weaker currencies may actually be stronger than the rand in local terms.
In the case of the USA, the rand has about one third of its purchasing power there than it does in South Africa (a Big Mac in the USA is equivalent to about R75,00 – three times the local price).
This reflects recent data which compared the cost of living in New York to other countries in the world – finding that South Africa was the cheapest place to live.
GoBankingRates ranked 112 nations by four key affordability metrics provided by online pricing database Numbeo. The report compared prices in these countries with those in New York, and found South Africa to be the cheapest.
Notably, this data again does not compare relative cost of living, but rather the purchasing power of international currency in local markets – aimed at expats and travellers.
When expressed as a portion of average income, it was found that South African’s pay a larger portion of their earnings on products, which reflects a higher cost of living for those earning in local currency.