Cost of Living for Expats Soar in Africa’s Oil-Rich Capitals

Cost of Living for Expats Soar in Africa's Oil-Rich Capitals
Luanda, Angola

AFRICANGLOBE – The capitals of Angola and South Sudan are the 1st and 3rd most expensive oil and gas towns in the world for expatriate workers, according to hydrocarbons news provider Rigzone.

Sifting through the latest cost of living data produced by ECA and Mercer International, Rigzone says both capitals now beat Perth and Moscow, and are separated only by Norway’s Stavanger, for living costs.

Prices in Luanda, Angola’s capital, are the stuff of legend. While some rumours sound far-fetched, such as $100 watermelons, you can expect to pay $200 for a pair of jeans, $50 for a hotel hamburger, and prices in supermarkets are ‘absurd’, says local lawyer.

Accommodation is the biggest hit. Rental of a small apartment can cost $6,800 a month. Visitors marvel at the contrasts; yachts in the Luandan harbour and tinted windowed SUVs working their way through rubbish and dust, with locals living in destitution. The country has one of the highest Gini coefficient rankings in the world and the government has done little for the people yet, although it did announce a $70 billion budget earlier this year.

Scant local production means nearly everything is imported. Until recently, Angola didn’t even produce its own bottled water. And the dominant expat demographic – wealthy oil men – shapes prices. Many accept whatever prices are on offer and can afford to pay.

Costs are starting to moderate for the foods desired by foreigners, thanks to increasing retail distribution networks and the arrivals of chains Shoprite and Kero, with Continente and Woolworths on their way. The influx of Portuguese migrants is helping too, says Jorge Jover at MITC Investimentos, a local business group. “Portuguese people open a small tasca as soon as they land and then you have now a better offer of simply, tasty and well priced meals”.

What of South Sudan’s Juba? Again, the oil industry is a key driver. Over three billion barrels of oil reserves are attracting a wealthy demographic of expat workers both from US oil services companies including Schlumberger and Halliburton, as well as growing interest from China, India and Malaysia.

Unlike Angola, there is also a second demographic pushing prices up: aid workers, with thousands of UN and donor groups setting up and putting strain on the housing stock.

Basic apartments can cost up to $3,000 dollars a month, and industrial air conditioning can reach $15,000 a year or higher. Lack of water and electricity supplies mean expat offices and residences come equipped with private water tankers and generators. For security reasons, most expats have their own drivers which, in addition to the cost of petrol, adds around a $100 a day to outgoings.

Landlords are not helping, says one aid worker. They are trying to recoup building costs within a year and pricing rent accordingly. The squeeze might be eased by construction work underway – around 50 hotels are currently under construction. As for goods and services, the landlocked nation faces a high import bill, exacerbated by cumbersome checkpoints.

According to a survey on the online cost of living calculator Expatistan, Juba is around 30 percent more expensive than Nairobi, with food and entertainment the biggest differentials.

Rigzone’s analysis fits a wider trend, with a summer survey finding that four of the world’s top 20 most costly places to live for expats are now in Africa – Luanda (2nd globally), Juba (4th), Congo Brazzaville (18th) and Kinshasa in the DRC (19th). This is bad news for the governments of all four countries, already among the most lopsided, worst governed in Africa.

Even wealthier locals are being shoved out of cities as real estate prices boom and past land seizures in the likes of Angola do nothing to promote much in the way of social peace.

And as far as EM-focused investors are concerned, take heed of a warning from Morgan Stanley’s Ruchir Sharma. If costs of living in an emerging market capital seem high for a Westerner, the country is probably not a ‘breakout nation’.

 

By: Adam Green