Warning for take-home pay in South Africa

Take-home pay is seeing significant year-on-year increases, but global uncertainty could seriously affect earnings going forward.

The latest BankeservAfrica Take-Home Pay Index showed that nominal average take-home pay declined to R17,811 in March 2025, 2.5% lower compared to February’s R18,272.

“This was still notably above the level of R15,983 a year earlier, reflecting the improving economic environment,” said Shergeran Naidoo, BankservAfrica’s Head of Stakeholder Engagements.

However, the average nominal take-home pay slipped in March 2025 as intensifying economic headwinds both locally and globally continued to pressure growth prospects and confidence levels.

This raises concerns over potential impacts on employment and earnings in the coming months despite the upward year-on-year momentum.

That said, BankservAfrica noted that this morning’s announcement to scrap the proposed VAT increases offers customers some reprieve.

The outlook will likely shift as escalating trade tensions and growing political uncertainty should affect the economy and salary earnings in the near term.

When adjusted for inflation, real take-home pay also moderated by 2.9% month-on-month to R15,343 in March 2025. However, it was still a notable 8.1% higher than year-ago levels.

“The significant moderation in consumer inflation during 2024 has had a notable positive impact on the purchasing power of salary earners,” said Elize Kruger, an independent economist.

“This trend has carried into 2025, with headline CPI figure easing to just 2.7% in March – the lowest level since June 2020.”

The headline CPI is forecast to average roughly 3.4% in 2025, compared to 4.4% in 2024, reaching its lowest annual rate since 3.3% recorded in the 2020s.

Although the rand exchange rate weakened sharply due to an escalating trade war and resultant global risk-off sentiment, it has recovered amid the US dollar’s depreciation.

The lower price of international oil could also be deflationary in the short term, with the price dropping heavilty amidst tensions between the USA and China.

“On the assumption that inflation will remain well-contained, 2025 will likely be the second consecutive year of positive real take-home pay growth, supporting demand in the economy,” said Kruger.

“This relief is much needed, as salary earners remain under strain from the high cost of living, persistently elevated interest rates, and additional tax burdens due to the lack of adjustment to tax brackets.”

The Ministry of Finance’s decision to withdraw the proposed VAT increase will also come as a relief to already financially strained South Africans, somewhat lifting confidence levels.

The combined effect of escalating global trade tensions and domestic political uncertainty has severely hit consumer confidence in Q1.

Salary earners may also become more cautious with spending despite greater purchasing power. The shift is visible in the recent moderation of real retail sales.

Outlook

Although the direct impact of US President Donald Trump’s tariffs on South Africa is limited to roughly 8% of total exports, some sectors, especially those that benefitted from AGOA, will feel the impact more severely.

Automotive, manufacturing, and agriculture were among the sectors that benefited from AGOA. The negative impact is expected to lead to earnings pressure.

The bigger negative impact on South Africa will likely come from the trade war’s indirect effect on the global economy at large.

The IMF has revised its South African expected growth rate down to just 1.0%, a 0.5 percentage point decrease from January.

The global economy is also expected to decrease to 2.8% this year, down from the long-term average of 3.7%.

The IMF’s outlook on the USA took the most significant hit, as 0.9 percentage points slashed it to just 1.8% for 2025.

Although global growth stayed well above recession levels, all regions were negatively impacted. The IMF said that the risk of a worldwide recession had increased to 30%, from 17% in October 2024.

Uncertainty remains exceptionally high, but the current low inflation environment means that monetary policy can play a key role in offsetting some of the economic impact of recent global shocks.

“Given that real interest rates remain unusually high for an economy stuck in a low-growth cycle, the SARB could lower interest rates further without compromising its mandate to keep inflation within the 3-6% target range,” Kruger said.