Living in the world's most expensive city
- 2 February 2012
- From the section Business
When you think of the world's most expensive cities, the dusty Angolan capital of Luanda seems an unlikely contender.
Potholed, chaotic and still scarred by decades of civil war, the city has little of the glitz and glamour of Tokyo, New York or Moscow, and an estimated half of Angolans live on less than $2 a day.
But despite the obvious poverty and sprawling slums, Luanda still manages to boast some eye-wateringly high prices.
A house can be $10,000 (£6,500) a month to rent, a basic meal out for two is easily $50, a hotel room can weigh in at $400 a night and a kilo of imported tomatoes a staggering $16.
A basic saloon car without a driver (which foreigners need to negotiate the difficult traffic and parking) will be $90 a day, but upgrade to a SUV (recommended due to the poor quality roads) and you're looking at $200.
It is prices like these that in recent years have seen Luanda top expatriate-cost-of-living surveys by agencies such as Mercer.
When Wina Miranda moved from Indonesia to Luanda in 2008 with her engineer husband Erwin Santosa, she knew the city was going to be expensive, but she wasn't prepared for quite how expensive.
"Actually the cost of living and the expense was all I found when I Googled Angola," the 34-year-old said.
"There wasn't much else, no pictures or other information, just stories saying how expensive it was here. But actually we didn't know quite how expensive it was until we really came here and experienced it."
Erwin, also 34, works for an international oil company which pays for his family's housing (a compact three-bedroom bungalow inside a private compound in the south of the city), his car and their seven-year-old daughter Obin's international school fees.
Wina said the family's main expense was groceries.
"I think we probably spend about $2,000 a month, and we don't even drink alcohol," she said, complaining that meat and vegetables were among the most expensive items.
"We are Asian and eat a lot of beansprouts but a can here is $6 and beef can be up to $45 for a kilo, and that is frozen, not even fresh."
Portuguese telecoms engineer Fernando Azvedo, who has lived in Luanda with his wife since 2010, said the only reasonably priced items were beer (60 cents a bottle), cigarettes ($1.50) and fuel - 40 cents for a litre of diesel.
"You can shop around Luanda to find better prices," he said. "But you are never too sure about the quality of the products. I only buy fruit outside of the regular shops, everything else you don't know the condition or where the product has been."
He pays $5,000 a month for his apartment - although this is covered by his company - and says he can easily spend $200 on a basic meal out for him and his wife with only a few drinks.
James Wilde, who has lived all over the world and is now based in Luanda as consultant for a German telecoms company, said: "Luanda is definitely the most expensive place I've ever been, as far as rents and dinners and things like that are concerned."
"The rent is extreme. A two-bedroom apartment in Luanda is $4-5,000, per month. When I lived in Moscow I was paying 2,000 euros a month for a two bedroom place, and here you pay much more and don't get nearly the same quality."
He added: "When I first arrived I remember I had to stock up my kitchen and that first time I went to the grocery store I spent $800. It didn't even fill the back of the car, I couldn't believe it.
"What's most frustrating though is that I don't think you get what you pay for, in terms of quality or service. But then, my salary is adjusted to be here so it's still definitely worth my while to work in Luanda and I think that is the case for most expatriates here."
So why is a city like Luanda so expensive?
There are several reasons. The main one is that Angola lived through a long civil war which started in 1975, when the country gained independence from Portugal, and continued right up until 2002.
During that time most industry, agriculture and local production stopped and basic infrastructure including roads, railways, electricity lines and water supplies were badly damaged.
Having once been a major exporter of products like coffee and cotton, and self-sufficient in most foods, Angola now imports an estimated 80% of its consumable goods.
For every tin or packet of food you buy in Luanda, you must factor in the cost involved in getting that product to Angola and onto the supermarket shelf, via a congested port with its highly bureaucratic customs and a traffic-clogged city.
There are some cynics who say Angola's business elite, who control the import companies, have also done little to bring down costs, although in recent years bringing down prices has been cited as a government priority.
Jose Severino, president of Angola's Industrial Association (AIA), says it is a vicious cycle: "You have unreliable electricity so you need a generator, poor transport networks and weak human capacity and that pushes up the cost of local production which means it is still cheaper to import goods instead of making them here.
"As long as this continues, and as long as local taxes are so high and red tape so complicated here there will be no incentive to produce locally and prices will not come down."
Jose Severino, who is also a government advisor, said there needed to be decentralisation away from Luanda, or at least a proper public transport network in order to reduce traffic congestion which he said cost people money, not just in time but also fatigue, productivity, and vehicle maintenance.
Falling property prices?
There is some good news though. Property prices may have already peaked.
Daniel Esteves runs Imorizon, a small real estate company in Luanda.
Originally from Portugal, but married to Angolan, he has lived in the country for five years.
"It's a supply and demand issue, he said. "As more construction is being done, there is more accommodation available and prices are coming down. In some cases apartments are 50% cheaper than they were three years ago and that trend will only continue as more housing is built."
Daniel Esteves said, however, that he can still rent out an apartment in the newly-built suburb of Talatona for as much as $15,000, and family homes in that area start from $6,000 a month going up to $30,000, depending on the type of the compound and its facilities.
The post-war flood of expatriates into Luanda, many working in the booming construction and oil sectors, has Esteves believes, definitely inflated prices.
"I would say the fact you have oil and other big multinational companies looking for so much accommodation has pushed up the costs because they will tend to just pay what they are asked for," he said.
But while Fernando Azvedo agrees the multinationals may have increased houses prices, he says at the same time it should be remembered that it was Angolan landlords who have been cashing in on the opportunity.
He added that while expats did sometimes splash out on restaurant meals or high-cost imported items in the supermarkets, he felt wealthy Angolans were the really big spenders.
"I think it is expatriates who are the ones who worry more about the cost and look more for a reasonable price for something," he said.
"In supermarkets I see many wealthy Angolans with a full cart of expensive goods like Champagne, they don't seem to care about the price."
Grow your own
Wina Miranda, who like her husband is an environmental engineer but is not working while in Luanda, said she and other expatriates had learned to be resourceful to get around the costs.
She brings in a container of non-perishable food each time they go home and she has recently discovered a Chinese farm which sells low-cost good quality vegetables.
"I know a lady who has her own yoghurt maker, ice-cream maker, bread maker, and she grows her own cabbage and bean sprouts," she said. "There's not much to do here so you do have the time to do these things.
"I remember 10 days after we got here my daughter had her fourth birthday and I had promised her she would have a Barbie cake, so I went out looking for one and it cost $360. But the following year, I managed to make her cake myself, that's what you do, you learn how to survive because a birthday cake for $360 is just ridiculous."
Ed Corbett is a British business consultant living in Luanda.
He speaks Portuguese and has no issue taking a local taxi or haggling for fruit from the street vendors, but accepts that this is not possible for all expatriates.
Prices, he said, had come down "remarkably" in the past 18 months, not just property but in supermarkets as well, mostly due to increased competition.
"I'd be surprised if Luanda retains its number one spot in the cost of living surveys this year," Ed Corbett said. "Luanda is expensive, but if you know where to shop, it is certainly becoming more affordable."