Petrol price pain coming for South Africa in July and August

The average take-home pay slowed for the third consecutive month in May 2025, according to the latest BankservAfrica Take-home Pay Index (BTPI), with the group warning of major petrol price pain coming in the next two months.

The index, which tracks approximately 3.8 million salary earners in South Africa, showed that nominal average take-home pay declined to R17,296 in May, 1.3% lower than the R17,532 registered in April.

However, the figure is still significantly higher than the R15,903 recorded in May 2024.

According to Shergeran Naidoo, BankservAfrica’s Head of Stakeholder Engagements, the slowing trend reflects the impact of a subdued economic environment with stalled growth in Q1 and a weakening global outlook, currently fuelled by the heightened volatility in the Middle East.

Independent economist, Elize Kruger, said the upward trend in take-home pay from mid-2024 to early 2025 has been a positive development, but the current U-turn shows 2025 is proving to be a volatile year.

Downward revisions to both global and local economic growth prospects have lowered confidence levels and put a pause on investment decisions.

Both investors and households are holding back on their spending decisions, Kruger said, and together, these could hurt employment and earnings prospects of salary earners in the coming months.

In real terms, take-home pay, adjusted for inflation, moderated by 1.1% month-on-month to R14,832 in May 2025, compared to R15,003 in April. Fortunately, pay remained 5.8% higher than May 2025.

The significant moderation in consumer inflation continues to have a positive impact on salary earners and their purchasing power with the latest headline CPI figure for May 2025 at only 2.8%.

However, the recent spike in international oil prices – due to the escalating conflict in the Middle East – could result in higher-than-expected headline CPI in the coming months and into 2026, the economist warned.

The international Brent crude oil price rose to around $78 a barrel following the USA’s attack on Iranian nuclear facilities but talks about a ceasefire quickly triggered a reversal with oil prices dipping below $70 a barrel again.

Against expectations and despite the global volatility, the rand exchange rate remained notably resilient, providing a marginal offset of the higher oil prices on fuel price expectations.

With the daily under-recovery at pumps running between 50 cents per litre for petrol grades and 80 cents per litre for diesel in recent days, Kruger said it is clear that economic pain is on the radar.

Following the current trendline, petrol and diesel prices are forecast to increase by about R1.00/l and R1.30/l, respectively on 2 July, and further increases could be expected in August, BankservAfrica said.

These will push headline CPI upwards towards 5% by year-end, ahead of the 3.6% forecast for 2025.

Concerningly, with the higher base calculation of 2025, the forecast average headline CPI for 2026 could be well above 4.5%, eroding the positive effects of lower inflation and likely triggering more conservatism from the South African Reserve Bank.

“Any further monetary loosening looks unlikely at this stage, in light of the intensifying Middle East conflict and the resultant negative impact on local fuel prices,” said Kruger.

“Still, despite the negative developments outlined, 2025 is expected to be the second consecutive year of positive real take-home pay growth, supporting demand in the economy.”

Businesses are also under pressure

On a more positive note, the Remchannel Salary and Wage Movement Survey, a biannual report by Old Mutual published in April 2025, indicates that salary increases should still beat inflation this year.

The report pointed to the average salary increasing by 5.82% in 2025, down slightly compared to 6.09% in the previous year.

However, BankservAfrica said this trend suggests a more cautious approach by employers, who must also prioritise cost control amidst a constrained economic environment.

“Interestingly, the report revealed a reduced overall staff turnover rate of 13.5%, reflecting a market with fewer new job opportunities due to widespread downsizing by companies,” it said.

“This data confirms the financial pressures employees are under, as 39% of those who resigned were seeking better pay and career growth, while 31% left due to dissatisfaction with their current roles.”

With the local economy stalling in Q1, and the weakening global backdrop adding to the downside scenario, the prospects of favourable earnings and employment opportunities have dimmed.

The latest Quarterly Employment Statistics survey released by Statistics South Africa indicated that total employment in the formal non-agricultural sector decreased by 74,000 in Q1 2025, with employment falling from 10.65 million in December 2024 to 10.58 million by March 2025.

According to the survey, 95,000 jobs were lost between March 2024 and March 2025.

The Labour Force Survey, which also included the informal sector, agricultural sector and employment in households, echoed the pressure, showing that the unemployment rate ticked higher to 32.9% in Q1, with 291,000 job opportunities lost.

Kruger said the unemployment situation in South Africa remains a crisis and deserves to be one of the top priorities of government.

She added that it is imperative that government pushes forward on structural reforms across sectors such as energy and logistics.

“This could contribute towards solving our local predicaments, lifting the local economy’s medium-term growth potential, but government must also ensure that policies and laws will foster rather than deter employment in South Africa,” she said.