Travelling to a developed economy such as the UK is an expensive exercise, as you probably know. My wife, son, and I recently returned from a three-week holiday in Surrey (with brief sojourns to other areas). With each English pound costing R23, we had to try to find a balance between spending cautiously and paying obscene amounts for sights and experiences that are now ingrained in our memories.
Tickets for two adults and a child on the London Eye came to GBP100, converting to an eye-watering R2 300 for a 30-minute single turn of the wheel. On the other hand, the National Gallery with its priceless Turners, Constables, and Impressionists, among others was free of charge, though booking online was essential in London’s busy tourist season.
I found that, on average, things cost about one-tenth in pounds what similar items would cost in rands in South Africa. This means the rand is undervalued by more than 50%. If there was what economists call “purchasing power parity”, a pound would cost R10 instead of R23. But I was surprised to see that not everything worked out so expensive. A medium basket of groceries with a value of about R750 in South Africa was GBP45, not GBP75 as expected.
That led me to an exercise comparing the costs of a range of items (see table), from a takeaway cappuccino to a two-bedroomed townhouse, also looking at these costs relative to income for earners in each country. My figures are very rough, as prices vary widely, and taking into account factors such as duties and taxes would complicate things unnecessarily.
Salaries
As a rule of thumb, salaries in the UK are about one-tenth in pounds what they are in rand in South Africa. For my exercise, I took the entry-level annual salary of a teacher with a three-year tertiary qualification, but an experienced legal secretary would receive about the same – GBP30 000 in the UK and R300 000 here.
Food
As already mentioned, a basketful of groceries of mainly foodstuffs at Sainsburys, much like our Checkers was GBP45 – less than expected. If you refer to the table you’ll see that I paid only 1.38 times or 38% more at the R23/GBP exchange rate than I would in South Africa for a similar basket. That means that Britons earning pounds are paying comparatively less for groceries than us earning rand in South Africa, as shown as a percentage of salary: 0.15% against 0.25%.
Eating out on the other hand, is extremely expensive, even for Britons. A hamburger and chips at a pub cost 0.053% of salary in the UK against 0.043% of salary in South Africa. Take-away cappuccinos, surprisingly are roughly equal at purchasing parity of 10 to one.
Books and electronics
Books and laptop computers were the only items on my list that were roughly equal at the R23/GBP exchange rate, which can be explained by the fact that they are largely direct imports in South Africa. At a purchasing-parity-level, they are much cheaper for a British earner than a South African one (0.05% of salary for a new paperback novel and 3.5% of salary for the latest-model MacBook Air, against 0.117% and 8.3% respectively).
Cars and fuel
A new basic-level Suzuki Swift will set you back GBP18 700 in England and R214 000 here, showing that again, cars are cheaper for UK earners than South African ones. Although I saw many electric cars in Surrey, petrol remains a sought-after commodity: on a purchasing-parity basis, it’s roughly similar cost-wise.
Property and rentals
Of all the items on my list, property in England is by far the most expensive. The southern counties are fairly affluent, so I took as my comparison property values in the middle-class suburb of Claremont in Cape Town. A two-bedroomed semi-detached townhouse in Surrey costs close to half a million pounds, whereas one in Claremont goes for around R2.5 million: 15 times the annual salary for a UK earner against 8.3 times the salary for a South African one.
Surprisingly, and there may be many solid reasons for this including generally lower interest rates, rentals are much lower relatively in England than they are in South Africa, as can be seen from the table. My rental figures are for a similar, two-bedroom townhouse.
In conclusion
For South African tourists, the UK is very expensive, but you can save by buying food at supermarkets and limiting your eating out. And you can pick up books and electronics at less than you’d pay here if you’re prepared to shop around.
For earners in the two countries, apart from the prohibitive property prices, the cost of living appears lower in the UK than here. And here we have the added burden of paying for inverters and security and other things our taxes should be covering.
* Hesse is former editor of Personal Finance.
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