South Africa’s average nominal take-home pay among an estimated four million salary earners in the country improved for the fifth consecutive month in August, according to the BankservAfrica Take-home Pay Index (BTPI).
Shergeran Naidoo, BankservAfrica’s head of stakeholder engagements, said yesterday that the average nominal take-home pay reached R16 582, showing a 6.7% increase compared to a year ago.
“In real terms, take-home pay also tracked higher at R14 520 in August 2024 or 1.9% up on a year ago levels,” Naidoo said.
According to the index, take-home pay has so far this year surprised to the upside, reflecting an improvement in South Africa’s economic fundamentals.
It said that not only has load shedding been suspended for almost six months, but a notable moderation in inflation, a new political landscape, and the first cut in interest rates since March 2020 have also provided a much-needed boost to confidence and an improved business environment.
Firm indications that the Government of National Unity (GNU) will focus on accelerating structural reforms to address obstacles to growth and job creation were also welcomed.
A comparison of the average nominal BTPI for the first eight months of this year to the corresponding period one year earlier, revealed a 6.6% increase. Similarly, in real terms, an increase of 1.3%.
Elize Kruger, an independent economist, said these numbers suggested this year will likely be the best year for salaries since 2020 or the first year in which the increase in average nominal take-home pay beat inflation since 2020.
“This improvement in purchasing power will go some way to provide much-needed relief to cash-strapped households and could provide support for consumer spending,” Kruger said.
The improved environment for salaries was confirmed in Remchannel’s April 2024 Salary and Wage Movements Survey, published this year. In line with the BTPI, the survey results suggested that this year will be the first time in three years that the average salary increases will be higher than inflation.
Given the importance of inflation as a determinant of salary increases, inflation expectations come into sharp focus.
According to the latest Inflation Expectations Survey, compiled quarterly by the Bureau of Economic Research (BER) on behalf of the South African Reserve Bank (SARB), expectations of average headline inflation were in the top half of the target range of 3–6%, at 4.8% for both 2025 and 2026 and still at 5.1% for 2024.
According to the latest Reuters consensus, average headline consumer inflation was forecast to be 4.7% in 2024, 4.3% for 2025, and 4.5% in 2026, comfortably within the SARB’s 3–6% target band, and the trigger for the SARB’s decision to cut the repo rate by 25 basis points at the most recent monetary policy committee meeting.
Kruger said with the indications that the average salary increase could realise around 6% in 2024, a real increase of around 1.3% was firmly on the table, as signalled by real BTPI data, a scenario that suggests a moderate recovery in purchasing power of salary earners.
“Seen in combination with the expectation of further interest rate cuts – with cumulative cuts of 125 basis points by May 2025 – and further relief at fuel pumps in the short term, the potential for an uptick in consumer expenditure and some debt repayment is on the rise.”
The BankservAfrica Private Pensions Index (BPPI), which tracks the pension payments of about 700 000 pensioners, moderated in both nominal and real terms in August 2024.
Naidoo said the average nominal private pension subsided to R11 122 in August, lower than the previous month, but still up from January’s R10 868, and still 3.4% higher than a year earlier.
In real terms, the average BankservAfrica BPPI for August also moderated on a monthly basis and dipped 1.0% below a year earlier.
However, when comparing the average nominal BPPI for the first eight months of 2024, to the corresponding period one year earlier, a 4.9% increase is observed, while the real BPPI declined marginally compared to the corresponding period in 2023.
The pension industry remains in sharp focus given the implementation of the two-pot retirement system on September 1, 2024.
The authors of the survey said the new dispensation will likely create a greater awareness among members about their retirement savings, which was welcomed and helpful. Currently, the BPPI reflects only pension payments to actual pensioners.
BUSINESS REPORT