US dollar overvalued in Zimbabwe: 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..