Source: US dollar overvalued in Zim: KFC index | The Herald August 9, 2016
The US dollar is overvalued by 12 percent in Zimbabwe according to the KFC index.
Market intelligence firm Sagaci Research recently published a quarterly update of its “KFC Index”. By analysing the prices of the Original Chicken Bucket from fast-food chain KFC, the index provides insight into African currency valuations and consumer purchasing ability relative to the US, and selected European countries. KFC has a presence in 18 African countries.
The second quarter of 2016 saw average costs of the Original Chicken Bucket vary greatly from country to country, indicating a disparity in real versus implied currency exchange rates.
The highest prices in comparison to US-based prices are found in Angola, Zimbabwe and Morocco, whose currencies are estimated to be overvalued by +28 percent, +12 percent and +6 percent, respectively, a decrease from +72 percent in Angola in the first quarter of 2016.
On the other hand, the lowest prices are found in the southern African countries of Lesotho and South Africa, whose currencies are both undervalued by 55 percent.
According to Sagaci, a 15-piece chicken bucket costs $31,90 in Angola, $26,44 in Zimbabwe while in South Africa it will set you back $11,30.
The index further reveals that the Nigerian naira has moved from being overvalued by +8 percent in the first quarter to being undervalued by -27 percent in the second quarter, with its currency devaluating by 42 percent over the same period. The Mozambican metical suffered a decrease of its value, plunging to -38 percent in the second quarter, as opposed to an overvaluation of 4 percent in the first quarter.
Moreover, the report shows that in the past three months, currencies have further depreciated on the black market in Egypt and Angola by 33 percent and 32 percent, respectively, creating an index of -64 percent for Angola compared to a +28 percent using official rates.
The KFC Index is a strong fact-based indicator of the financial turmoil affecting African countries, whether driven by rapidly decreasing global oil prices or other factors. — Wires.
COMMENTS
This is why US dollars are leaving Zimbabwe
You can buy products for less than half the cost in South Africa.
It is interesting that the politicians are so clever now that they have all the answers! Having completely destroyed the integrity of the Zimbabwean tender via their wholesale theft – they now lament the fact that KFC is the only means of establishing a form of exchange rate! It is ironic that the totally incompetant, senile Jongwe that has murdered, raped and pillaged the country for 36 years – should now become fascinated with KFC! It seems that the Genocidal Jongwe is now too old and tough, and bony to even be made enticing with some finger licking good propoganda! KFC have told us that it is all over!
It is very simple why things cost more in Zimbabwe in US$ than else where in Southern Africa. The reason is that Mugabe and his gang of thieves have destroyed the economy, the corruption, patronage, overspending, nepotism and the theft of farms has caused a collapse in the productive capacity of Zimbabwe. This has forced retailers like KFC to import more on which the Government takes its cut by way of duties and it costs Zimbabweans more. Angola is an example of the same conditions but because they have oil they have survived better.
Strange Economics. In considering the price of a good, one must consider input costs including wages power and material cost all of which are quire high in Zimbabwe and all countries with economic problems. If a current buys less, is it overvalued. Please help me.
The chickens have come home to roost.