This is how much poorer South Africans have become over the past year
Despite a stronger rand and a more upbeat attitude towards the South African economy by economists – South Africans are taking home less money than they were a year ago.
The BankservAfrica Disposable Salary Index (BDSI) data for January 2017 shows that average real disposable salaries continued to decline, with the average take-home (adjusted for inflation) at R13,778 compared to R14,146 in January 2016.
In nominal terms, average salaries increased by 3.9% – below the actual cost of living increase – but South African salaries remain under pressure due to the tax bracket increments, low salary increases and medical insurance costs.
In real terms (adjusted for inflation), salaries are 2.5% lower than a year ago.
Take-home salary 2012 – 2016
Real salary changes 2012 – 2016
Transactional data for February (reflecting the state of economic activity) showed a more positive turn.
The flow of money through the South African financial system improved on both a monthly and quarterly basis, according to BankservAfrica, showing notably higher values than in January.
However these metrics are still lower than they were a year ago, the group noted.
While economic activity is picking up, new taxes coming into effect from April 1st will continue to put pressure on South African consumers, while the prospect of any interest rate cuts from the Reserve Bank currently being up in the air.
The table below outlines average salary trends year-on-year in 2016, in both nominal and real terms.
| Month | Nominal Average Salary | Real Average Salary | Nominal Growth | Real Growth |
|---|---|---|---|---|
| Jan 2016 | R13 241 | R14 146 | +6.4% | +1.0% |
| Feb 2016 | R13 356 | R14 091 | +6.1% | -0.1% |
| Mar 2016 | R13 343 | R13 912 | +6.0% | -0.5% |
| Apr 2016 | R13 385 | R13 789 | +7.3% | +0.7% |
| May 2016 | R13 252 | R13 659 | +6.7% | +0.5% |
| June 2016 | R13 314 | R13 705 | +5.8% | -0.4% |
| Jul 2016 | R13 367 | R13 760 | +4.0% | -2.0% |
| Aug 2016 | R13 472 | R13 754 | +3.3% | -2.6% |
| Sep 2016 | R13 900 | R14 102 | +5.8% | -0.2% |
| Oct 2016 | R13 749 | R13 832 | +3.6% | -2.4% |
| Nov 2016 | R13 851 | R13 926 | +5.1% | -1.2% |
| Dec 2016 | R13 679 | R13 720 | +4.1% | -2.4% |
| Jan 2016 | R13 752 | R13 778 | +3.9% | -2.6% |
Rate cut hopes
In February and March 2017, South Africa’s economic prospects have picked up a bit, with more, often surprisingly positive economic data coming out from Stats SA.
Two of the most positive economic metrics being a better-than-expected current account figure and a softer inflation point at 6.3%.
The rand has reflected this positive data through a rally to under R12.50 to the dollar, egged on by global economic movements – particularly moved to hike rates by the US Fed.
While this has led to hopes of a possible SARB rate cut, analysts at Nomura have warned investors not to get ahead of themselves.
Nomura holds a generally bearish view on South Africa’s economy, finding the positively-spun growth narrative to be overplayed. According to the firm, South Africa has little to show for its growth numbers, while political risks linger, and no progress is being made on unemployment.
The firm believes that, while there is room to consider possible cuts by SARB, the likelihood is that the bank will hold rates.
“We see rates unchanged next week at 7.00% and a more neutral tone from the MPC
statement, with inflation risks moving to balanced from being to the upside previously,” Nomura said.
“We think the SARB framework remains in place and will be reinforced by a focus on the
‘uncomfortably high’ level of long run inflation in the forecast as a barrier to cut. However, it is worth thinking through how the SARB could cut rates within this framework.
“Put simply, the framework is flexible and well-designed enough to allow cuts but possibly not for the reasons the market expects,” it said.
Read: 8 reasons why you shouldn’t be too optimistic about SA’s economy in 2017
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