Good news for salaries in South Africa in 2025

Data shows that South African households are in good stead when it comes to income, showing real growth in after-tax pay, which is leading to higher consumption.

Better yet, the trend is likely to continue into 2025 and even 2026, with lower inflation, lower rates and higher pay boosting household spending and the economy.

This is according to real income (inflation-adjusted) data from the BankservAfrica take-home pay index and the latest Household Consumption Expenditure (HCE) data from Stats SA.

Real income rose by 5.2% y/y in October after climbing over the third quarter of the year. This has supported HCE rising by 0.5% quarter-on-quarter in Q3’s reading of GDP.

According to Investec chief economist Annabel Bishop, excluding the dramatic fall in the agriculture sector, South Africa’s GDP expanded by 0.4% quarter on quarter.

This paints an overall much better picture of the South African economy.

Experts in the agricultural sector, including the Bureau for Food and Agricultural Policy (BFAP) and the Agricultural Business Chamber of SA, have questioned the Stats SA data and called for a deeper investigation.

Regardless, Bishop noted that the signs are positive for hosueholds.

“With household consumption expenditure typically contributing well over two-thirds of GDP, this fuelled GDP growth (ex-agriculture), while imports rose by 1.1% qqsa ahead of the festive season, with the latter detracting from overall GDP,” Bishop said.

October saw the average salary dip below R17,000 (in nominal terms), to R16 895, with salary earners seeing a slight moderation on the month.

On the year, however, average incomes were up 9.2% for October and 10.2% y/y in September, rising consistently since the second half of 2023.

Notably, the lift in purchasing power is expected to persist over 2025 and into 2026.

Interest rates have fallen modestly in South Africa to date, and are expected to fall further next year, while economic growth is expected to strengthen to 1.7% y/y, from likely 0.9% y/y this year, aiding employment in 2025.

Next year HCE growth is expected at 2.2% y/y.

Adding to the good news for households, Bishop noted that the Money Stress Tracker for 2024 pointed to households being 5% to 10% less stressed than in 2023, aided by substantially lower inflation, higher real incomes and interest rate cuts.

Bishop noted that the Stress Tracker did flag continued financial stress for households – particularly among those earning more than R20,000 a month, who “seem to have the most debt repayment pressure”.

“This is the backbone of the middle-class population in South Africa. Fewer are taking active steps to deal with their money stress,” the report said.

Despite this, the latest FNB/BER Consumer Confidence Index (CCI) shows an upward trend in sentiment from this class, with the index for this grouping improving further from its five-year high of -6 in Q3 2024 to -4 in Q4 2024.

“A string of favourable developments has seen consumer confidence riding much higher since Q2 2024, including the formation of the GNU, the termination of load shedding, a substantial deceleration in inflation, two interest rate cuts and the implementation of the two-pot retirement system,” said FNB Chief Economist Mamello Matikinca-Ngwenya.

Read: Positive turn for South Africans earning over R20,000 per month