Bad news for take-home pay in South Africa

 ·29 Nov 2023

The BankservAfrica Take-home Pay Index (BTPI) dropped in October after three consecutive months of increases.

“The nominal average take-home pay was R15,535 in October 2023, tracking lower than the R15,691 recorded in the previous month,” said Shergeran Naidoo, BankservAfrica’s Head of Stakeholder Engagements.

The October figure was only 1.8% higher than the R15,265 in October 2022.

Despite the challenging economic environment, nominal salaries increased after stabilising in Q2. The nominal BTPI is still a healthy 6.6% higher than January 2023 and 3.9% higher in real terms. This signals that the erosion of purchasing power has eased compared to earlier parts of the year.

“However, on a year-to-date basis, this is less impressive, with the average nominal BTPI of R15,197 only 0.4% higher than the corresponding period in 2022, while in real terms, the average BTPI is still 5.5% lower year-to-date compared to 2022,” said Elize Kruger, Independent Economist.

The ability of companies to pay inflation-related salary increases was hurt over the last 18 months, primarily due to the significant increases in the operating cost environment, especially due to the impact of load shedding and global factors.

This aligns with the Remchannel Bi-annual 2023 Salary and Wage Movements survey from July, which showed that CPI is no longer the main determinant of salary increases. 

Annual growth in the average real take-home pay retracted in September and further in October, highlighting a sharp increase in headline inflation.

Real take-home pay declined from September’s R14,226 to R13,942 in October 2023 and is also 3.4% below the year-ago level.

“The renewed erosion in purchasing power has been driven by sharp fuel and food price increases that pushed headline CPI to 5.4% and 5.9% in September and October, respectively,” said Kruger.

However, November saw a notable drop in fuel prices due to lower international oil prices and a slightly stronger rand exchange rate, with another cut expected in December.

Consumer inflation is expected to average around 6.0% this year – a decline from the 13-year high of 6.9% last year, with a further moderation to around 5.2% in 2024.

The interest rate cycle has likely peaked, even if it is expected to remain elevated over the next few months.

Amidst the severe strain on household finances, this scenario remains negative for consumer spending and confidence levels.

However, after slightly improving the unemployment rate to 31.9% in Q3, Kruger said that BankservAfrica’s data indicates that the nation’s job market has had a solid start to Q4.

The BankservAfrica Private Pensions Index (BPPI) dropped slightly marginally in nominal and real terms in the three months leading up to October, but it remains in positive territory on an annual basis.

“The average nominal private pension was R10,757 in October compared to the previous month’s R10,797. It remained a healthy 6.5% higher than one year earlier,” said Naidoo. 

In real terms, the average private pension in October 2023 reached R9,649, 0.6% higher than a year prior, indicating that the purchasing power of pensioners has been preserved amid the high inflation environment.

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