Salaries in South Africa set for big increases in 2024
South African salaries have had a solid start to 2024, and the rest of the year should remain positive.
Several recent pieces of data show that South Africa’s salaries have ticked higher at the start of the year.
Stats SA’s latest Quarterly Employment Statistics (QES) showed that the average formal, non-agricultural salary in South Africa was R26,791 in Q1 2024.
Although this was a 0.1% decrease from R26,894 in Q4 2024, it was 4.6% higher than the R25,602 Q1 2023.
However, this year-on-year growth was still lower than inflation, which averaged around 5%, meaning that it had declined in real terms.
Nevertheless, the more recent BankservAfrica Take-home Pay Index (BTPI), which analyses the salaries of roughly 3 million South Africans, saw a stronger increase.
The nominal take-home pay reached R15,888 in May, showing a 10% improvement on year-ago levels.
In real terms, salaries adjusted for inflation tracked slightly higher at R14,015 in May – or 4.5% up on year-ago levels.
BankservAfrica said that the business environment has improved significantly since 2023.
With no load shedding for 100 days (the first time since 2021), companies’ ability to pay better salary increases has been boosted.
“A comparison of the average nominal BankservAfrica Take-home Pay Index for the five months to May 2024, to the corresponding period one year earlier, revealed a 6.8% increase and a 1.4% growth in real terms,” said Elize Kruger, Independent Economist.
“If sustained throughout the year, 2024 could turn out to be a notably better year for salaries, unlike 2023, when the average nominal BTPI increased by only 1.2%.”
The trends observed by BankserAfrica are consistent with the South African Reserve Bank’s forecast of an annual salary increase of 6.1% in 2024 for non-agricultural workers.
Specialist labour law practice Andrew Levy & Associates also flagged a higher collective wage settlement level for 2024, between 6.5% and 7.2%, better than the average wage settlement rate in collective bargaining agreements of 6.3% in 2023.
Less pressure on purse strings
The increases will be good news for households who have faced a wretched last 18 to 24 months.
Consumers have had to battle elevated inflation and, in turn, 15-year-high interest rates, with the repo rate currently standing at 8.25%.
Although inflation has moderated from 7.8% y/y in July 2022 to 5.2% in May 2024, potential interest rate cuts in 2025 remain debated.
With forecasts suggesting that headline inflation will average 4.3% in Q4 2024 and the rand strengthening in recent weeks, BankservAfrica said starting the interest rate cutting cycle by no later than the September Monetary Policy Committee meeting should be considered.
“Two 25bps cuts in interest rates are possible by year-end and could somewhat alleviate the pressure on households with credit exposure while stimulating retail expenditure,” said Kruger.
However, economists remain divided on when the cutting cycle will start.
Nedbank’s economists expect cuts in September and November, while Investec Chief Economist Annabel Bishop expects the cutting cycle to only start in November.
Bank of America’s (BofA’s) expectation is even worse and expects the cutting cycle to only start in January 2025, with a cumulative 100bps in January, March, May and July.
BofA said that the SARB is unlikely to cut before the US Federal Reserve, which is only expected to start cutting in December of this year.
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