Yes…African cities are more expensive than NYC!

I often get this comment from friends back home: the silver lining of you working in Africa is that you’ll be able to save lots of money. NO this cannot be further from the truth. Just because Africa is the least developed part of the world doesn’t mean an average Joe from America can live like a millionaire here. In fact it is exactly the opposite.

Mercer just released their 2012 cost of living index for world cities, based on a basket of 200 goods and surveyed global corporate and government employees working in foreign countries. Once again, African cities made the hall of fame. Cities in impoverished countries such as Luanda, N’djamena, Niamey, Bangui, Dakar, Abidjan, Ouagadougou, Lagos are in the same league as Geneva, Moscow, Tokyo, Seoul, London, and more expensive than NYC, or any other American city for that matter.

The most expensive African cities are also in countries that are both very poor and very unequal. Of course you can live cheaply off local dishes, travel around in matatus or tro tros, and stay in relatively dilapidated buildings without diesel generators or running water and get slaughtered by mosquitoes. A decent apartment in central Accra (which is apparently cheaper than a majority of African capital cities already) with air-conditioner, power generator etc, would cost you $3,000-$5,000 a month (not counting potentially $1,000 a month in air-conditioning fee). Isn’t that as expensive or more so than Manhattan??

A few things that are home-grown from the tropical regions are cheap – but you can count them with your fingers (avocado, mango, plantain, banana, papaya, pineapple). That’s it. Things you think would be cheap here – like rice, are absolutely not since even rice or toothpick is imported from Asia. And with any tinge of modernity in any goods or service – even well packaged avocadoes, mangoes etc, would cost you a fortune – more than in Western countries.

So here are my top reasons for the absurdity:

1) Lack of competition: due to a variety of reasons a lot of businesses don’t want to enter Africa or start in Africa – major ones being real or perceived political and macroeconomic risks and very onerous requirements to start a business.. This creates a vicious cycle of monopoly + political lobbying power = impossible barriers to entry for future competitors. There may only be one cement factory, one Mexican restaurant, or one supplier of Sony cameras. The one area of modernity that Africa has conquered is mobile technology – and that’s solely due to deregulation that allowed the entries of large multinational mobile operators each year that drove down prices to levels that can even be afforded by well over a majority of Africans.

2) Lack of demand from a middle class consumer society. The only people with enough purchase power to consume modern goods are expat workers and a few local elites – and these expats tend to be richer than the average citizen in their home country (such as oil/mining company employees). The apartheid-like inequality then breeds more unhealthy consumption patterns with expats and locals living and consuming totally mutually exclusive baskets of goods.

3) Lack of production: African countries are mostly primary commodity export-driven. There is very little manufacturing of anything, not even value added products from whatever primary commodity they are producing – like petrochemicals from crude oil or aluminum from bauxite. Any raw material is simply extracted from earth or ocean and shipped out.

4) Lack of infrastructure: this is the saddest of all. The despicable condition of roads…Even for products that are home-grown – 50% of avocadoes, mangoes, papayas etc become rotten before they can even get to market!!! That’s why an avocado cost 15 cents in a village, whereas it’s 50 cents in Accra. And forget about inter-country trade in Africa….. Strawberries and some varieties of apples, oranges and tomatoes for instance in Ghana cost $10 per kg – since it’s all imported from South Africa or the West, and only one supermarket sells it. However, the neighbor Burkina Faso produces strawberries. But the cost of transporting strawberries from Ouagadougou down to Accra is EVEN MORE than the 1,000% markup from these monopolistic importers.

5) Corruption/bribery/security: goods in the capital city, major cities, and even neighborhoods within capital cities where most expats live – goods can be 2 or 3 times more expensive than just outside of the “fenced area”. All those checkpoints are supposed to protect the expats but they are really bribe heaven. But would you want to venture out there?? Bandits, armed robbers, security forces with machetes demanding bribes larger than your head just so they can “protect you”.

6) Most countries in Africa do not have massive cheap labor like in Asia. This affects both the manufacturing and service sectors. Africa is low in population density. The spoils of the extractive sector also leads many to believe that they can get rich from mining or oil extraction (most are still unemployed looking for a job in those sectors)…

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One thought on “Yes…African cities are more expensive than NYC!

  1. sganapati

    You may be right about Africa being more “expensive” than expected. But don’t use the Mercer data for a comparison. The Mercer numbers are meant to be used by McKinsey consultants who get transfered overseas to recalculate their compensation. So, it is basically more expensive to live the .1% lifestyle in Angola than New York. The study really doesn’t tell use much about the other 99ish%.

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