“Undervalued Rand” should be trading at R5.20/$

According to latest ‘Big Mac Index’, the Rand should be trading at less than half of what it’s currently at.


Once a year The Economist brings out the Big Mac Index, which looks at the major currencies and analyses whether they’re being measured correctly in terms of purchasing power parity (PPP).

PPP theorises that, over time, global exchange rates should naturally move to a space where certain items, like a Big Mac, would cost more or less the same in two different countries.

Now, while there are tonnes of other aspects to take into consideration, that the Big Mac Index does not; it’s still interesting to see where we’d be standing.

According to The Economist: “Burgernomics was never intended as a precise gauge of currency misalignment, merely a tool to make exchange-rate theory more digestible.”

Anyway, back to the fun stuff. If we take the index at face value, the rand is undervalued by quite a bit, 62.70% to be exact, and should be trading at R5.20 to the US Dollar.

On top of that, one Pound should actually only get you R8.52 and a Euro R6.78.

Wouldn’t it be nice?