Employed South Africans could finally find some relief in 2024, with salary hikes in the country expected to outstrip inflation after two years of falling short. <\/p>\n\n\n\n
Salary hikes are expected to average 6.9% in 2024, while inflation will likely average 5.0%, giving a 1.9% real increase.<\/p>\n\n\n\n
According to Nedbank’s latest State of the Economy report for April, households in South Africa have been stretched thin over the last few years. <\/p>\n\n\n\n
Real (inflation-adjusted) personal disposable income (PDI) contracted 0.3% in 2023, having slowed throughout 2022.<\/p>\n\n\n\n
The main culprits behind the decline have been inflation\u2014eroding pay\u2014and persistently high interest rates, which have been keeping debtors in a chokehold.<\/p>\n\n\n\n
“Despite aggressive nominal wage increases of around 6% on average and higher employment, real or inflation-adjusted compensation of employees (COE), which account for just over 71% of PDI, contracted by a sharp 2.3% in 2022 before shrinking by a further albeit less severe 0.8% in 2023,” the banks said.<\/p>\n\n\n\n
However, this is expected to turn the corner in 2024, with South African salaries projected to increase by between 6.5% and 7.2% (average 6.9%) in 2024<\/strong>, Nedbank said, citing the latest Wage Settlement Survey by employment advisory firm, Andrew Levy.<\/p>\n\n\n\n Inflation, meanwhile, is forecast to recede further, averaging around 5% in 2024, pointing to real wage growth of about 1.9%. <\/p>\n\n\n\n According to the latest BankservAfrica Take-Home Pay Index,<\/strong><\/a> the group’s data aligns with the South African Reserve Bank\u2019s forecast of an average salary increase of 6.1% in 2024.<\/p>\n\n\n\n Echoing Nedbank’s forecasts, with inflation expected to ease, this will likely lead to higher real disposable income in the coming months.<\/p>\n\n\n\n The rub<\/strong><\/p>\n\n\n\n Unfortunately, Nedbank said this potential boost could be contained or countered by renewed job losses and high interest rates.<\/p>\n\n\n\n “According to the Labour Force Survey, employment declined slightly in Q4 2023, falling by 0.1% over the quarter after eight quarters of consistent job gains. <\/p>\n\n\n\n “About 22,000 people lost their jobs in Q4, which, together with the increase in the labour force, pushed the unemployment rate up slightly to 32.1% from 31.9% in Q3, only fractionally better than 32.7% at the end of 2022 but still considerably lower than 35.3% at the end of 2021.”<\/p>\n\n\n\n The Quarterly Employment Survey paints a bleaker picture, it said, showing that total formal sector employment shrank by 1.8% qoq in Q4 2023, with full-time employment down a marginal 0.1% while part-time employment plunged 13.5%. <\/p>\n\n\n\n “Given the persistent pressure on company profits over the past two years, and with no meaningful economic upturn in sight<\/strong><\/a>, the risk of further job losses remains relatively high,” Nedbank said.<\/p>\n\n\n\n Interest rates a worry<\/strong><\/p>\n\n\n\n While the data suggests great news for salaries in South Africa, Nedbank said that the reality is that, on top of a weaker labour market, households are likely to remain under pressure due to the Reserve Bank’s highly restrictive monetary policy.<\/p>\n\n\n\n This is also expected to linger for much longer than many economists had anticipated at the start of the year.<\/p>\n\n\n\n “The full impact of the 475 bps jump in interest rates is taking hold. Debt service costs gradually increased throughout 2022 and 2023, systematically consuming a more significant share of disposable income and squeezing the funds available for discretionary spending,” Nedbank said.<\/p>\n\n\n\n The ratio of debt service costs to disposable income climbed to 9% by the end of 2023, and the personal saving rate fell deeper into the red at -1.1% of disposable income, it said. <\/p>\n\n\n\n “Households tightened their belts, containing borrowing and spending. More consumers struggled to meet debt repayments…and most commercial banks reported a significant increase in repayment arrears in 2023.”<\/p>\n\n\n\n While rising real incomes will provide some relief, the pressure will ease meaningfully only once interest rates start decreasing, Nedbank said. <\/p>\n\n\n\n