R7,590 per month boost for the average salary in South Africa – but there’s a catch

The average salary in South Africa has beat inflation by an extra R7,590 per month over the past 30 years, yet this increase still falls short of the rising cost of living.

Since 1994, South Africa has seen impressive growth in average salaries, with figures beating inflation.

However, despite a nearly 825% rise in take-home pay, many South Africans find that the real increase in earnings is not enough to match the rapidly escalating cost of living.

The disparity between income growth and rising living expenses, especially in key areas like housing, utilities, and other essentials, has resulted in a financial reality that falls short of easing the average South African’s financial pressures.

In 1994, the average after-tax salary in South Africa was around R21,490 annually (R1,790 per month), according to the World Wealth and Income Database.

Fast forward to 2024, and the average take-home pay has reached R198,984 per year, or about R16,582 monthly, based on data from BankservAfrica.

This increase outpaces inflation, which has risen by approximately 422.5% over the same period.

Had salary increases merely kept pace with inflation, the average income earner would be earning approximately R108,000 annually (R8,995 per month) today.

Instead, earnings growth in South Africa has increased by 825%, adding around R91,000 per year, or R7,590 per month, above what inflation would have adjusted salaries to over the past 30 years.

This is a significant uplift, indicating a net gain for South Africans over time.

However, the benefits of this wage growth are tempered by the fact that many key living expenses have grown at rates even faster than income.

The catch

While salary growth has been robust, housing prices and other costs have surged ahead.

The average home price has increased by 811% since 1994, reaching R1,458,924 (as outlined by the Oobarometer report for Q2 2024).

In the last 15 years, property values have continued to outstrip inflation, doubling and, in some cases, tripling due to various market and valuation factors.

Statistics South Africa (Stats SA) further highlights that property rates saw an average annual growth of 6.8% between 2009 and 2024, surpassing the country’s inflation rate, which averaged around 5.1% per year during that period.

Certain municipalities have seen even higher increases, partly due to the General Valuation Roll (GVR), a process conducted every four years to update property values.

While the goal is to reflect fair, market-related prices, some properties have faced substantial overvaluations.

According to the Organisation Undoing Tax Abuse (OUTA), many properties are now overvalued by up to 70%, with some in smaller municipalities facing staggering increases in property rates of up to 2000%.

This sharp rise in property expenses places additional financial strain on homeowners.

Besides rising mortgage payments and property rates, other essential services like water and electricity have seen extreme price hikes, further straining household budgets.

Utility costs have become another major source of financial pressure.

Stats SA data reveals that between 2009 and 2024, electricity tariffs rose by an average of 10.5% per year, while water tariffs increased by an average of 10.2% per year.

More recently, a five-year analysis (2019 to 2024) indicates that electricity costs grew at an annual rate of 11.2%, doubling the average inflation rate of about 5% during the same period.

This exponential growth in utility prices means that households are paying substantially more for essential services than they were a decade ago.

Looking back even further, from 1996 to 2024, the disparity is even starker.

Electricity tariffs increased by 1,710%—approximately five times the inflation rate—while water tariffs surged by 2,100%, nearly six times the inflation rate.

These increases in essential service costs underscore the larger issue: while salaries have grown, the rapid inflation of utilities and basic expenses is outpacing these gains, leaving many South Africans struggling to keep up.

Looking forward, salary forecasts for South Africa in 2024 and 2025 are cautiously optimistic, with experts predicting a moderate growth in average take-home pay.

Analysts anticipate a projected annual increase of between 5% and 6%, depending on sector performance, economic conditions, and inflation rates.

However, even with this expected growth, it is likely that salaries will still lag behind the real increases in essential living costs.

Overall, while South Africa’s salary growth over the past 30 years appears impressive, the high and rising costs of housing, utilities, and other essentials mean that this income growth offers limited relief to the average worker.

Real income gains are being steadily eroded by a cost of living that consistently outpaces wage growth, painting a challenging picture for financial sustainability in the years to come.

Read: Major turning point for South Africans earning around R25,000 a month