The cost of living in Johannesburg shot up in 2021, mostly due to petrol and car prices that kept climbing, while a stronger Rand compared to 2020 made local prices more expensive in US-dollar terms.
According to The Economist Intelligence Unit’s (EIU) Worldwide Cost of Living report for 2021, Johannesburg climbed ten places in the rankings to become more expensive than the coastal city of Al Khobar in Saudi Arabia and get closer to the cost of living in Moscow.
Prices to compare each city’s cost of living to others are collected in local currency. But the EIU then converts them to the US dollar for the index to calculate and create the index. Therefore, currency movements also have a big impact on whether a city is ranked as cheaper or more expensive to live in.
Petrol and car prices push the cost of living in SA cities
The circulated free summary of the report doesn’t show the ranks of all 173 cities that EIU included in the report.
But it highlights the ten most expensive and the ten cheapest cities to live in. The ten biggest movers up the ranks, meaning they became more expensive, and those who became much cheaper get a mention.
Rishabh Upadhyay, the team leader of the economics unit at the EIU, said most of the cities the report cover are lower down the rankings, meaning that they are cheaper to live in. However, South African cities experienced “some sort of an upward price pressure”.
He said South African cities experienced both a rise in the index value and the rankings, primarily due to the increase in transport costs.
“The automobile prices or the car prices and petrol prices rose significantly for South Africa. And these are also partly due to the shortages in the global semiconductors, and microchips supply all pertaining to the supply chain issues,” said Upadhyay.
He said as the supply chain issues affected the availability of cars, this drove up vehicle prices.
Furthermore, South Africa experienced significant currency appreciation compared to the 2020 survey, making local costs more expensive when translated into US-dollar terms.
Africa, a tale of two worlds
Overall, the Middle East and Africa region housed the most expensive and the cheapest cities simultaneously.
“I think it’s the first time it’s happened that region is housing both the most expensive and the cheapest cities at the same time,” said Upadhyay.
He attributed this primarily to structural issues like the pace of economic recovery from the pandemic, how well countries controlled their inflation, and the strength of their currencies during the current Covid-19 turmoil.
Israel’s city of Tel Aviv surpassed Paris this year to become the most expensive city globally, mainly because of the appreciation in the Israeli currency. But in local-currency terms, the average price increases in Tel Aviv were more modest, at just 1.6%. But the prices of certain goods, around one-tenth of goods included in the city’s basket including alcohol, transport and personal care items, increased significantly.
On the other hand, five of the cheapest cities in the world are in Africa and the Middle East region, i.e. Algiers in Algeria, Lusaka in Zambia, Tunis in Tunisia, Tripoli in Libya and Damascus in Syria.-fin24
