Best news in three years for take-home pay in South Africa

Take-home pay in South Africa has hit its highest point in three years—but economists warn that it won’t be smooth sailing in the months ahead.

Real take-home pay, measured in BankservAfrica’s Take-home Pay Index (BTPI), rose 0.9% to R15,799 in February.

This is a significant improvement of 10.7% year-on-year and puts after-tax pay at the highest in three years.

Nominal average take-home pay rose marginally to R18,241 in February 2025, compared to R18,141 in January, but far above R15,983 in February 2024.

This continues the upward trend in take-home pay over the past eight months.

BankservAfrica noted that in 2024, real take-home pay averaged R14,292, up by 3.1%, representing the first increase in the annual average since 2020.

The climb was thanks to a sharp slowdown in inflation through 2024, which continued to have a positive effect on salary earners’ purchasing power.

It said that if inflation remains well-contained, 2025 will likely be the second consecutive year of positive real take-home pay growth.

However, the group warned that, despite the improvement, salary earners remain under pressure due to the rising cost of living, elevated interest rates, and new taxes being brought in 2025.

These are all placing additional pressure on household budgets.

These headwinds have knocked consumer confidence levels in Q1, with the latest Consumer Confidence Index (CCI) published this week tanking.

The CCI dropped from -6 to -20 index points in the first quarter of 2025, indicating that most consumers expect their finances to get worse this year.

While headline CPI is forecasted to average only 3.6% in 2025 compared to 4.4% in 2024, risks are to the upside.

Independent economist Elize Kruger said that the higher VAT rate and no adjustment to tax brackets announced in the 2025 National Budget pose significant risks this year.

Geopolitical turmoil and South Africa’s strained relations with the United States are also big red flags.

Rough waters for pay ahead

According to publicly available data sources, nominal salary increases for 2025 are forecast to range between 4.1% and 6.5%.

In real terms, if inflation holds, this would translate to a real increase of between 0.5% and 2.9% this year.

On a forecast average nominal salary increase of 5.3% and an average headline CPI projection of 3.6%, a real wage increase of 1.7% could be realised in 2025.

“This will be the second consecutive annual real increase and an important supporting factor for household consumption expenditure in 2025,” Kruger said.

However, the global economy has become increasingly uncertain due to ongoing geopolitical tensions and the potential negative impact of the evolving global trade war.

While the ultimate impact on South Africa’s economy is still unclear, it is unlikely to be favourable and, as such, represents a downside risk to the real GDP growth forecast of 1.5% for 2025, Kruger said.

Another big risk is that taxes—particularly the VAT hike to 15.5% in 2025—will drive up inflation and reduce disposable income, while the trade war will do the same for global and local pricing.

The South African Reserve Bank’s Monetary Policy Committee flagged this when it held interest rates last week.

This has resulted in interest rates being held in what some economists deem restrictive territory, keeping the pressure on households.

While interest rates have come down by 75 basis points since September 2024, lending rates are still higher than they were pre-Covid-19.

Economists and analysts—and the SARB itself—see room for at least another 25 basis point cut, but the timing of this is up in the air.

The SARB, along with other central banks, is taking a ‘wait and see’ approach on global politics. Further interest rate cuts are only expected once the waters have settled.