A R675 tashas pasta? Living in SA is cheap!

Anyone who’s travelled to the UK (or much of Western Europe, or indeed the US) lately will know just how expensive most developed nations are compared to South Africa. The old adage of not converting back to rands when swiping or tapping in pounds has never been truer.

After all, the rand is at R18.50ish to the dollar, R19ish to the euro, and R23ish to the pound.

Of course, incomes are higher in a market like the UK than in South Africa. This is logical. But living expenses are also higher. This is a common mistake made by South Africans who are considering working abroad. Fixating on the income (simply multiplying by 23) is very dangerous if you ignore the expense side of the equation.

A 250ml can of Red Bull costs £1.75 at Tesco, which is about R40. At Pick n Pay, the same can costs R18.99, a little less than half the price.

Obviously, direct comparisons are always tricky given factors such as purchasing power parity and GDP per capita, but The Economist’s Big Mac Index has shown that the rand has remained undervalued versus other major currencies, such as the US dollar and British pound, over time.

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According to the World Bank, GDP per capita based on purchasing power parity is $58 000 in the UK.

In South Africa, it’s a little over $15 000.

Where prices tend to be significantly more expensive than in South Africa is in any service-based industry where labour is required. A common example of this is fast food outlets, restaurants or bars.

Labour shortages in the UK (post-Brexit) and the US in recent years have been a sharp driver of higher inflation in these markets. Staff costs in South Africa (and most other developing markets) are structurally lower than in developed markets.

Usefully, there are a number of South African brands operating in this space in the UK these days. None are more well-known than Nando’s, which has become extremely popular and well-entrenched in the culture of that market.

Nando’s trades from nearly 500 locations in the UK, and while it has nearly 100 in London, its menu has standard pricing across the region. The Nando’s in Perth, Scotland, for example, has the exact same menu as the one in Covent Garden.

In South Africa, one can buy a full Nando’s chicken (with no sides) for R199. In the UK, the same item costs £15.95, which equates to a little over R370 – 87% higher than the SA price.

ALSO READ: Nando’s takes SA’s creative heritage to the world

A pita and single side is R97 here and £11.80 (R275) in the UK, a difference of 184%. The input costs of a pita are more complicated than a full chicken (chicken + spice + human to grill it), which may explain much of this difference.

Ocean Basket has two restaurants in the south of London (one in the southeast and another in the southwest). Its popular fish and chips main costs R120 here and £12 (or the equivalent of R280) in the UK.

That’s 133% more. It is telling that the R120 price point is high, relatively speaking, for South Africa. On its local menu, it has an ‘OB Select’ fish option for more price-conscious diners, presumably using a lower grade of fish. This is priced at R99.

The SA price for 10 king prawns (with chips and rice) is R385. In the UK, the same item is £36 (the equivalent of R840), 118% more.

Tashas (or, more correctly, ‘tashas’) opened its first UK restaurant at Battersea in London in late 2023. Only a handful of items are common to its SA and UK menus. The price equivalents in the UK are between two-and-a-half and three-and-a-half times the SA pricing.

The Breakfast Royale (two poached eggs, spinach, lemon sauce, and sourdough/seeded bread) is R148 here and £16 in the UK (the equivalent of nearly R375). This is a relatively modest difference of 150%.

A freezochino is R68 in SA and £9 (R210) in Battersea. Its famous Savva’s Chicken Pasta (grilled chicken strips, mushrooms, chives, garlic, and cream) is R206 in SA. The price in London? £29, or the equivalent of R675 (230% more).

ALSO READ: From South Africa to the world: Tashas to add six additional locations globally

What about beer?

A common comparison especially affluent or even upper-middle-class Saffas enjoy making around the braai is the price of a pint (or, indeed, a sandwich from Sainsbury’s or Marks & Spencer).

In London, you’d be hard-pressed to find a pint of draught lager for anything under £7. That’s the equivalent of nearly R165. In Joburg, a 500ml draught at a pub is close to a quarter of the price.

Even in Cape Town, where a draught in Bree Street starts at R65, it is about 40% of the equivalent price in the UK. Don’t bother comparing local prices to what you’ll pay on the banks of the Thames, where pints are about £9, the equivalent of R210.

As an aside, a ticket on the Heathrow Express (26km) is £25, the equivalent of nearly R600. A Gautrain ticket from OR Tambo to Sandton (20km) is R219.

Why do you think tens of thousands of Brits come to Cape Town every week (even though it’s relatively pricey compared to the rest of SA) in our summer?

The Economist’s Big Mac Index has for decades clearly illustrated how undervalued the South African rand is versus the dollar (and, by implication, other hard currencies).

In July 2024, the rand was 49.9% undervalued against the dollar. Even when adjusted to take into account the GDP of each country, South Africa’s currency remains 38% undervalued versus USD. The Economist updated its index in January but has not yet released its source data on GitHub (although this is imminent).

* An exchange rate of R23.30: £1, the selling rate of banks in early February, has been used for these comparisons.

This article was republished from Moneyweb. Read the original here.