Comparing milk prices across Africa suggests the rand may get stronger

pixabay.com, 2019

The Economist in 1986 created the “Big Mac Index” to assess the over- or undervaluation of currencies.

The approach assumes that exchange rates should, over time, move to levels that would equalise prices of identical goods or services in any two countries.

Because many African countries don’t have McDonald’s, Rand Merchant Bank used milk instead.

Over the last five years, most currencies, on average, trended higher towards overvaluation.

The South African rand, however, overvalued five years ago, is undervalued today.

The Money Show’s Bruce Whitfield interviewed Neville Mandimika, Africa Strategist at Rand Merchant Bank.

For more detail, listen to the interview in the audio below.

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