This is the average take-home pay in South Africa right now – with some positive signs

 ·24 Apr 2024

Take-home pay in South Africa declined in March 2024 – but with inflation expected to moderate, there is hope that workers will soon start to see real pay increases in the near future.

Average take-home pay in South Africa, measured with the BankservAfrica Take-home Pay Index (BTPI), dropped slightly in March as companies faced various market and economic factors, such as higher fuel prices and the weak level of the rand exchange rate.

“The average real take-home pay, adjusted for inflation, tracked lower at R14,236 in March and slightly below year-ago levels,” said Shergeran Naidoo, BankservAfrica’s Head of Stakeholder Engagements.

In nominal terms, the average salary moderated slightly to reach R16,043. This is still 5.0% up from a year prior and 3.6% up from December’s R15,484.

The average nominal BTPI in Q1 2024 compared to the corresponding quarter one year earlier showed a 6.2% increase.

Independent economist Elize Kruger said that if this trend continues, 2024 could be a better year for salaries as the business environment improves, unlike the last two years, where employers struggled to pay inflation-related increases due to economic challenges.

While GDP growth is still estimated at a relatively low 1.1% for 2024, this is an improvement from 0.6% in 2023.

The improved outlook rests on the assumption load shedding will reduce and average inflation will moderate, and this, in turn, starts the interest rate-cutting cycle. There are risks to this outlook, however.

Year to date, BankservAfrica data aligns with the South African Reserve Bank’s forecast of an average salary increase of 6.1% in 2024.

A new trend, noticeable in the mining industry, is for companies to enter into longer-term wage agreements, largely with above-inflation outcomes for salary earners.

With average headline CPI expected to moderate to 5.3% in 2024 and 4.8% in 2025, workers are set to see real increases in their salaries.

“Inflation has turned out to be quite sticky on the downward path, locally and globally, driven mostly by higher services and administered price inflation,” said Kruger.

Headline inflation dropped notably from 7.1% in March 2023 to 5.3% a year later, but it is forecast to remain around 5.3%, staying at the 5.5% level until September and below 5% by year-end.

“Positive real increases in average salaries in 2024 would be a welcomed development as salaried workers’ purchasing power will improve somewhat compared to the previous two years,” said Kruger.

With lower interest rates, spending ability and confidence levels in financially stressed households should improve.

Nevertheless, cuts in interest rates are only predicted to occur in the year’s second half, if at all.

Pension improvement

In addition, the BankservAfrica Private Pensions Index dropped lower in nominal and real terms in March but remained well above year-ago levels.

The average nominal private pension dropped to R10,710 in March 2024, compared to R10,811 the previous month, but it is 6.5% higher than a year earlier.

Moreover, the real average private pension increased by 1.1% in March compared to a year prior, maintaining its recent inflation-beating track record.

“The BankservAfrica data signals that the purchasing power of pensioners represented in the BankservAfrica sample (predominantly ex-government employees) has mostly been preserved amid the still elevated inflation environment.”

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