Good news for anyone earning a salary in South Africa

BankservAfrica’s latest Take-home Pay Index (BTPI) shows that after-tax pay in South Africa is on the rise, reflecting positive shifts for salaries in the country that are expected to continue in 2025.

The index, which tracks the average nominal take-home pay of an estimated 4 million salary earners in South Africa, started the year on a strong note, recording nominal after-tax earnings at R18,098 in January.

This is up 4.9% from R17,246 in December 2024 and up 16.3% from R15,564 in January 2024.

In real terms, accounting for inflation, take-home pay also increased to R15,659 in January 2025, a notable 12.8% increase from January 2024.

Pay has reached its highest level since February 2022, BankservAfrica noted.

This is largely thanks to the significant moderation in consumer inflation during 2025, which moved from 5.3% in January 2024 to 3.0% in December.

Lower-than-expected inflation has had a positive impact on salary earners’ purchasing power.

Shergeran Naidoo, BankservAfrica’s Head of Stakeholder Engagements, said that the upward trend in average salaries started in early 2024 and, despite some volatility, looks set to continue.

Independent economist Elize Kruger said the positive trend also reflects a generally improved business environment and higher confidence levels in the economy.

Three interest rate cuts in September 2024, November 2024 and January 2025 have also gone a long way in providing relief.

Company profitability also improved during 2024, as reflected in the above inflation increase in the gross operating surplus of companies.

The improving environment was also echoed in the sizeable total return on the FTSE/JSE All Share Index in 2024 (+13.4%), reflecting the promising earnings potential of listed companies.

The recovery in disposable income has been seen in healthier retail sales (up 2.5% year-on-year) and improved passenger car sales (up 1.1%).

This would have also been supported by Two-Pot retirement withdrawals, Kruger noted.

Overall, real take-home pay averaged R14,292 in 2024, up 3.1%, representing the first real increase in take-home pay since 2020. This puts South African salary earners on good footiong for the year ahead.

Assuming that inflation will remain well-contained in 2025—with the average headline CPI forecasted to be at 4.2%—2025 could be the second consecutive year of positive real take-home pay growth, Kruger said.

The economic outlook indicates that the salary gains seen in 2024 could continue to strengthen.

On the economic front, real GDP growth is forecasted to increase by 1.7% in 2025, somewhat higher than in 2024.

The acceleration in growth will be driven by a combination of improved household consumption expenditures, higher fixed investment spending, and further advances in structural reforms.

An ongoing focus on improving South Africa’s electricity generation capacity, addressing supply chain blockages relating to freight rail and port operations, and upgrading water infrastructure, among others, are much-needed actions to propel the economy forward.

“The anticipated improvement in the business environment is expected to enable companies to offer more substantial salary increases in 2025, which in combination with a moderate inflation environment, could mean a second consecutive year of a real increase in take-home pay,” Kruger said.

There are risks to watch out for, however.

If the 2025 National Budget had been tabled with the 2% VAT increase, it would have derailed the positive inflation outlook somewhat, eroding the fragile recovery in the purchasing power of salary earners.

The budget is currently in the process of being reworked, but there is still no certainty on what the National Treasury will do to plug its funding gap.

“While we await the revised budget on 12 March, the postponement has introduced uncertainty, raising concerns about its potential impact on the economy’s recovery prospects,” Kruger said.