Lately, our practice is dealing with emigration queries on a daily basis. More and more of our clients are either moving offshore or many have already been abroad for quite some time. Helping them with the formal requirements is the easy part. We often get the dreaded question: “Is there anything else I should be thinking of?” The answer is categorically “YES!”. Unfortunately, we can’t prepare you for everything.
We’ve written about some of the information you need to check before emigrating. Click here if you missed our article. There is no generic step-by-step guide that we can provide that will give you all the answers. You will have to sit with your advisor and an emigration expert and work through the financial matters in detail.
One aspect that we come across time and again though is clients expressing surprise about the cost of living once they are abroad. For someone still living in SA, it often feels like an abstract conversation, but today I saw a visualisation that really hit home for me.
The price of a beer around the world
Never have I been happier to live in South Africa! As you can see above, we officially have the cheapest beer in the world. This probably explains our severe social issues to some extent, but that is a more complex problem than we are able to deal with in this column. Rather than getting too stuck on beer, I thought we could have a look at some other items that we spend our money on, to try to establish why expats are so often surprised by the cost of living in their new cities.
Deutsche Bank issues an annual report (Mapping the World’s Prices) comparing global prices of various items. They have not analysed the 2020 data yet, but the 2019 report surprised us in many aspects.
Cape Town and Johannesburg were ranked 28 and 32 in the Quality-of-Life Index respectively. This is well above major cities like Paris, Rome, London and Hong Kong. The Quality-of-Life Index is a compilation of various factors, including purchasing power index, house price to income ratio, cost of living index, etc. Keep in mind that stats do not always tell the whole story – these rankings will be greatly affected by the fact that the data is analysed in dollars and have probably worsened a bit since 2019 due to the stronger rand, but these numbers cannot be ignored. Whatever the detail, they indicate that the cost of living in SA is relatively cheap, all things considered.
We are assuming that someone who plans to emigrate will do a lot of homework on the big things like rent, healthcare, taxes, insurance, etc. Today we want to highlight the smaller things that you may feel are not so important, but still make a big dent in your pocket if you don’t keep track of them.
Looking at the Cheap Date Index (taxi, dinner/lunch for two at a pub or diner, soft drinks, two movie tickets and a couple of beers), Johannesburg and Cape Town ranked 38 and 44, respectively. As an avid moviegoer, pub diner and beer drinker, I was quite upset that we are on the list at all, but again, the devil is in the detail. According to Deutsche Bank, a date in Johannesburg will cost just under $70, but important to highlight is that the same date will cost you a cool $203 in Zurich, $143 in New York and $138 in London. So, while Jozi may be ranked the 38th most expensive, your date is still half price relative to the London couple’s evening out.
A litre of Coke cost you $1.25 in Johannesburg in 2019. The rand is a bit stronger now, so the current price is closer to $1.46. At the time, Norway was the most expensive, coming in at $4.73 per litre. Those South Africans who do not drink large amounts of beer, are almost certain to be drinking large amounts of Coke (or whichever other flavour soft drink you prefer), so this is a cost that will add up very quickly.
A pair of jeans would be roughly half the cost in SA relative to that in Zurich and around 30% cheaper than in Australia or the UK, where many South Africans seem to be moving to.
A mid-size car (Volkswagen Golf or similar), would cost you just under $23 000 in SA in 2019, coming in at 26th most expensive in the world. Buying the same Golf in the UK would have cost you around $26 500, roughly 15% more expensive.
Smokers have never had a better reason to quit the habit! A packet of cigarettes in SA comes in at roughly $3, where the same will cost you $14 in both New York and London. That is almost five times more expensive and will be a true budget breaker for heavy smokers.
If you are used to having your domestic worker or nanny around five days of the week, you will have to set aside a special budget for these items. According to Payscale.com, the average hourly rate for a cleaner in SA is R20.61 compared to R202 per hour in London as at today’s rand/sterling exchange rate. Similarly, the average rate for a nanny in SA is currently R23 per hour, compared to R204 per hour. We cannot agree that R20.61 an hour is a living wage any way you look at it, but R200 an hour seems quite far to the other side of the spectrum.
None of the above items will make you change your mind about where you want to live in the world. That is not the point of this article. For those of you planning to leave, we hope that it will prepare you for the cost of the smaller things that you may not have analysed as carefully yet but will nonetheless have a big impact on your day-to-day finances.
For those of you who are sticking around, we hope your next beer will taste just that little bit better after reading this article.