Thursday, 21 August 2008

Counting the Cost of living

Recently, the Telegraph in the UK published an article relating to food price inflation. Within that article was a basket of groceries that were priced up based on the prices at a variety of UK supermarkets.

A friend of mine who writes the Homecoming Revolution blog, used that information to compare the cost of living in South Africa to that in the UK, and came to a very interesting conclusion.

However, Paul used a direct financial comparison, utilising a exchange rate of the Pound to the Rand to compare the South African and UK grocery baskets. That got me thinking – I once was told about the Big Mac Index, and I wondered what happened if the same baskets were compared not in monetary terms, but in terms of common items available in each country.

Rather than guess the Big Mac price in each country, I researched the cost of a 2 litre Coca Cola and the cost of a litre of petrol. Here are my results:

Cost of basket in UK – £27.03 (average per table)
Cost of basket in South Africa – R336.83 (per Paul’s research – Pick n Pay)

2 litre Coke:
Cost in South Africa: R12.00 (from my local Spar)
Index*: 28.07
Cost in the UK: £1.49 (per the Tesco Price Check website)
Index*: 18.14

1 litre of Petrol
Cost in South Africa: R10.20
Index*: 33.02
Cost in the UK: £1.149 (per the website - using London as a base)
Index*: 23.53

*Index represents the cost of the basket, divided by the cost of the item – in other words the number of the item that equates to the basket.

On this basis South Africa turns out to have a higher cost of living, as the basket equates to MORE of the item.

But then again these are just statistics…. And I am sure that 10 other people could find 10 other calculations and 10 different results…


po said...

I find the cost of living much higher in SA than in the UK.

In the UK you have more buying power with you salary. In SA there never seemed to be as much money left over. I can afford a much better style of living (if you look at it in a material way) in the UK.

Can't do anything about the weather though.

Mike said...

It was an interesting comparison, looking at the cost of living in monetary terms, and in commodities, so to speak.

The monetary comparison worked at the time Paul did it - but might have changed the day after due to exchange rates. Whereas the commodity comparison is more stable.

I agree - in terms of life style I do think there is more buying power in the UK.

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