Great news for take-home pay in South Africa

Take-home pay in South Africa has reached its highest point in record time, with the latest BankservAfrica Take-home Pay Index (BTPI) hitting over R17,000 for the first time since inception.

This is a result of continued upward momentum in pay this year, with the average disposable income recorded in September 2024 now at R17,171 – 10.2% higher than the R15,586 recorded in September 2023.

In real terms, adjusted for inflation, the average take-home pay is now at R14,969 – up 5.6% year-on-year from R14,173.

“Recent developments in the economy have given a boost to salary earners and could potentially spill over into the upcoming busy shopping period,” BankservAfrica said.

Shergeran Naidoo, BankservAfrica’s Head of Stakeholder Engagements, noted that moderating consumer inflation will likely benefit salary earners and boost their purchasing power.

Real take-home pay rose by 2.2% in the first nine months of 2024 compared to the full-year average in 2023. In nominal terms, it climbed by 6.3%.

According to independent economist, Elize Kruger, “the suspension of load shedding for almost seven months, significant easing of inflation, new political landscape, and the first interest rate cuts since March 2020, have provided a much-needed boost to confidence.”

Firm indications that the Government of National Unity (GNU) will focus on accelerating structural reforms to overcome growth and job creation obstacles have also driven positive sentiment.

A trend that has been developing in the recent period, especially in unionised industries, is for companies to enter into longer-term wage agreements for up to five years.

Often, these result in above-inflation outcomes for salary earners and have the added benefit of labour stability and cost certainty for companies.

With the average headline CPI forecast to average at 4.5% in 2024 and 2025 (vs 6.0% in 2023), workers locked into these agreements are expected to receive handsome real increases as the lower inflation outcomes are realised, said Kruger.

While estimates point to an average salary increase of around 6% in 2024, the latest data in StatsSA’s Quarterly Employment Statistics suggest a somewhat lower average increase for the first six months of the year.

The nominal increase in average monthly earnings in the formal non-agricultural sector, including overtime and bonuses, was 4.7% in H1 2024.

However, notable differences are evident.

The transport (7.0%) and finance (6.6%) sectors recorded the highest increases in the first six months of 2024, unlike community and social services (2.3%) and manufacturing (3.0%).

“Overall, with 2024 being a year of two distinct halves, the higher levels of economic growth forecasts for the second half of the year could trigger a further uptick in salaries in more sectors towards year-end,” said Kruger.

Still, the BTPI and industry indications suggest that 2024 could be the best year for salaries since 2020 when the average nominal take-home pay beats inflation.

“This improvement in purchasing power will provide much-needed relief to cash-strapped households and could, in combination with fuel price relief and lower interest rates, support consumer spending in the latter part of the year. Black Friday sales are also likely to benefit from the anticipated improvement in household finances,” the economist said.

The BankservAfrica Private Pensions Index (BPPI), tracking the pension payments to about 700,000 pensioners, increased in nominal and real terms in September 2024.

“The average nominal private pension rose to R11,410 in September 2024, up from August’s R11,161 and 6.2% higher than a year earlier,” said Naidoo.

In real terms, the average private pension performed better on a monthly basis and remains 2.3% above a year earlier.

When comparing the average nominal BPPI for the first nine months of 2024 to the corresponding period one year earlier, a 5.1% increase is shown. The real BPPI is just marginally above the same period in 2023.

The introduction of the Two-Pot Retirement System on 1 September 2024 has generated awareness among members about their retirement savings.

Given that the new system has only recently been active – and with payments lagging – it is still early days for empirical insights from the BankservAfrica pension payments data.

Read: Even wealthy South Africans are living paycheque to paycheque