Expatriates and the cost of living in Africa
The city of Luanda in Angola has been ranked as the second most expensive place for expatriates to live in the world, according to this year’s Mercer’s Cost of Living survey. Last year Luanda – for the second year running – was ranked as the number one most expensive place for expatriates, a position which has now been taken over by Tokyo.
Mercer’s Cost of Living survey measures the comparative cost of living for expatriates in 214 cities, using New York City and the US dollar as the base city and currency for the rankings. “We compare the cost of over 200 items in each location, including housing, transport, food, clothing, household goods and entertainment,” said Nathalie Constantin-Métral, principal at Mercer.
Why is Luanda so expensive?
Despite being resource-rich, Angola is still struggling from the effects of a civil war that started when the country gained independence from Portugal in 1975, and continued until 2002. For nearly 30 years Angola fell behind in its development, affecting local industry and agricultural production, as well as damaging basic infrastructure, such as roads, railways and electricity lines. Now, 10 years later, the country is only beginning to find its feet. It is estimated that – due to the current cost of transport and local production – Angola imports 80% of its consumer goods.
In addition, finding acceptable, secure accommodation – a major expense for expatriates – in Luanda is difficult, making the limited supply of good accommodation in high demand and expensive.
How will this concern Angola?
The purpose of Mercer’s Cost of Living survey is to assist multinational companies and governments with determining compensation allowances for their expatriate employees. Not only can the survey affect the amount of multinational business offices and employees within the city and country, but also the movement of specialists to the country.
Constantin-Métral is responsible for compiling the ranking. “Deploying expatriate employees is becoming an increasingly important aspect of multinational companies’ business strategy, including expansion,” she said. “But with volatile markets and stunted economic growth in many parts of the world, a keen eye on cost efficiency is essential, including on expatriate remuneration packages. Making sure salaries adequately reflect the difference in cost of living to the employee’s home country is important in order to attract and retain the right talent where companies need them.”
What about the rest of Africa?
N’Djamena, Chad is the second most expensive city in Africa for expatriates, ranking eighth in the world, but dropping from third place in 2011. Dropping eight places, Libreville, Gabon is the third African city on the list (20th in the world), followed by Khartoum, Sudan which has moved up from 44th place to the 26th position.
“It might be surprising to see 20 African cities in the top third of the ranking. The main driver behind this is the difficulty finding good, secure accommodation for expatriates. So the limited supply of acceptable accommodation is very expensive. The cost of imported international goods is also high, contributing to many regional cities moving up the ranking,” said Constantin-Métral.
In South Africa, both Johannesburg (ranked 154th) and Cape Town (ranked 179th) have fallen over 20 places since last year’s survey, reflecting the weakening South African rand against the US dollar over the past year. Tunis, Tunisia (ranked 209th) remains the least expensive city for expatriates in Africa.