The ‘real’ value of the rand in 2019 according to the Big Mac Index

Jola

Honorary Master
Joined
Sep 22, 2005
Messages
17,908
#2
R5.56 per dollar, sounds about right.

Will be quite happy with 8, though.

Thanks, ANC !!!
 

McT

The Humble Scot!
Joined
May 19, 2009
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35,139
#3
In PPP terms, a Big Mac costs 60% less in South Africa (US$2.24) than in the United States (US$5.58) at market exchange rates. Based on differences in GDP per person, a Big Mac should cost 45% less. This suggests the rand is 26.9% undervalued, and should be at R10.14 to the dollar.
Doubt that any in government and few in business would like to see the ZAR at 10.14 to the US $.
 

Cius

Expert Member
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Jan 20, 2009
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4,942
#5
It's not actually a great comparison as the cost of a big mac in the USA is artificially higher due to crazy labour costs in the USA. Our burger flippers, and food producers mostly work at close to minimum wage and in SA that is about 10% of min wage in the USA at the current exchange rate.

Keep in mind that labour is so high in the USA that doing something like re-doing a transmission (clutch) on a decent second hand car is so expensive that it pays to rather scrap the car. My uncle had to do that. Would cost him more to fix that scrap a perfectly decent vehicle. Even semi skilled labour gets paid very well over there. We are a long ways away from even wanting to be at parity to the big mac index as that kind of value is only possible in a country with high skill levels and great education. Hence the big mac index is best used to compare yourself to your peers. USA could compare to EU countries, Japan, etc. We should be comparing ourselves to other countries in the 20 to 35 top economy category preferably at a similar level of development.
 

WaxLyrical

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Joined
Oct 20, 2011
Messages
18,137
#6
It's not actually a great comparison as the cost of a big mac in the USA is artificially higher due to crazy labour costs in the USA. Our burger flippers, and food producers mostly work at close to minimum wage and in SA that is about 10% of min wage in the USA at the current exchange rate.

Keep in mind that labour is so high in the USA that doing something like re-doing a transmission (clutch) on a decent second hand car is so expensive that it pays to rather scrap the car. My uncle had to do that. Would cost him more to fix that scrap a perfectly decent vehicle. Even semi skilled labour gets paid very well over there. We are a long ways away from even wanting to be at parity to the big mac index as that kind of value is only possible in a country with high skill levels and great education. Hence the big mac index is best used to compare yourself to your peers. USA could compare to EU countries, Japan, etc. We should be comparing ourselves to other countries in the 20 to 35 top economy category preferably at a similar level of development.
Only marginally
The cheapest 2L coke is $1.56. Don't think it could be much cheaper than this.
 

Cius

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Jan 20, 2009
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4,942
#7
Only marginally
The cheapest 2L coke is $1.56. Don't think it could be much cheaper than this.
Yep, for factory produced stuff the price difference will not be that big. It is biggest on something that has to be manually prepared, like a burger, as then the labour cost factor is just so much larger. I suspect if you compared the cost of physical goods and made that the basis of the index it would paint a very different picture.
 
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