What the price of Coca Cola reveals about the economic productivity of SSA countries

The economic landscape of Sub-Saharan Africa has been a topic of interest for analysts and researchers looking to gauge the region's economic productivity and standard of living. One such approach gaining traction is the Cola-Nomics index developed by the research team at Morgan & Co. The index uses the price of Coca-Cola as a reference point to compare economic indicators across different African countries. The methodology behind the Cola-Nomics index is akin to the renowned Big Mac index, which utilizes the price of a Big Mac to evaluate currency values worldwide. However, in the case of Sub-Saharan Africa, the team at Morgan & Co opted for a more ubiquitous commodity, Coca-Cola. By comparing the price of a two-liter bottle of Coca-Cola in seven selected countries to the price in the United States, the index provides insights into implied exchange rates, purchasing power, and productivity levels. Batanai Matsika, Head of Research at Morgan & Co, shed light on the significance of the index in assessing various economic factors. Matsika noted that the index not only highlights differences in exchange rates but also delves into buying power and productivity in frontier markets like Zimbabwe. The index revealed a notable undervaluation of the exchange rate in Zimbabwe, indicating potential limitations for businesses in expanding their operations due to pricing constraints. In terms of currency valuation and productivity, Matsika pointed out that countries like South Africa and Namibia displayed higher levels of productivity compared to others in Southern Africa. Despite potential diplomatic sensitivities, the index provides valuable insights into economic disparities among African nations. However, the methodology faced scrutiny regarding the fixed nature of exchange rates in certain countries, raising concerns about the accuracy of the data. Matsika acknowledged the need for adjustments and emphasized that the key focus of the index is on purchasing power and productivity rather than providing definitive exchange rate valuations. Shifting focus to recent economic developments, Matsika discussed the impact of the monetary policy statement issued in Zimbabwe, highlighting challenges such as budget and current account deficits. The country faces inflation and recession concerns, with inflation targets surpassing 500%. Measures like increased overnight rates have posed challenges for businesses, hampering growth prospects. The Cola-Nomics index offers a unique perspective on economic conditions in Sub-Saharan Africa, providing a nuanced understanding of purchasing power, productivity levels, and exchange rate differentials. The index serves as a valuable tool for investors, policymakers, and analysts seeking to navigate the complex economic landscape of the region.