South Africans’ average take-home pay down 7.5% in January

The average take-home pay for South Africans has declined by 7.5% in January compared to the same period last year when it was R15 467.

The average nominal take-home pay for January was R14 305, also somewhat lower than the R14 684 recorded in December.

This data from the BankservAfrica Take-Home Pay Index (BTPI) shows that the challenging economy continues to take a toll on salary payments.

The BTPI is calculated monthly by dividing the total value of salaries paid into the bank accounts of employees, excluding salaries greater than R100 000 per month, by the total number of salary payments loaded onto the National Payment System (NPS) and paid by an EFT message processed by BankservAfrica’s systems.

These payments exclude UIF contributions, personal income tax and employee pension payments and a portion of medical insurance premiums and even debt repayments could be subtracted.

The BTPI reflects the trend in almost 4 million monthly salary payments, which represents about 37% of all non-farm employees in the South African labour market.

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“The constant load shedding, high production costs due to high fuel prices and rising wage demands, as well as elevated interest rates and moderating demand are all contributing to the dismal growth prospects faced by companies,” Shergeran Naidoo, BankservAfrica’s head of stakeholder engagements, says.

Many companies resort to redirecting their capital earmarked for investment towards self-sufficiency and becoming less dependent on Eskom, which makes it more likely that employment growth and salary increases are affected.

Slowly moderating inflation eating into take-home pay

In addition, consumer inflation has been moderating slowly, resulting in the ongoing erosion of households’ buying power, according to independent economist Elize Kruger.

Inflation reached a 13-year high of 6.9% in 2022, and is forecast to average at around 5.7% in 2023.

“Confirming this trend, BankservAfrica’s data indicated a notable 13.7% decline in the average real take-home salary in January 2023, compared to a year earlier. This trend subsequently filtered through to lacklustre household consumption spending,” she says.

Data from Statistics SA also recently indicated that real retail sales only increased by 1.7% in 2022, compared to 6.3% in 2022.

Although employment levels increased notably last year, we were still catching up to the job losses from the Covid-19 pandemic, but January showed the opposite. 

“Adjusted for weekly payments, BankservAfrica’s data suggests that 606 500 fewer salaries were paid into South Africans’ bank accounts in January 2023, compared to the previous month,” she says, adding that 60% of these job losses occurred in salary categories for people earning less than R5 000 per month.

This confirms that it is most likely a reversal of temporary jobs created for the annual festive season in December, Kruger says.

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Private pensions more stable

The BankservAfrica Private Pensions Index (BPPI) in nominal term remained flat compared to December.

“The average pension paid was R10 021 in January, which was 6.9% higher than one year earlier and slightly above the monthly average in 2022, which was R9 982,” Naidoo says.

The value of total take-home pay and private pension payments of less than R100 000 per month processed by BankservAfrica in January 2023 increased by 7.9% in real terms and by 15.3% in nominal terms, compared to a year earlier, not seasonally adjusted.

“There is little indication of a notably different economic environment in 2023, and the job market is likely to remain strained as the main economic challenges prevail,” Kruger says.

However, she points out on the positive side, last week’s 2023 National Budget included no changes to major tax rates or the fuel levy, while the minister provided relief for ‘bracket creep’, where an employee pays higher tax following an inflation-related salary increase, ending worse off after-tax.

“Granting tax relief by adjusting personal income tax brackets and rebates for the effect of inflation cost the state a notable R15.7 billion, a sizeable benefit to taxpayers. Furthermore, R4 billion in relief is provided for households that install solar panels and R5 billion to companies through an expansion of the renewable energy incentive.”

However, Kruger says, these measures are unlikely to make a material difference to the economic growth prospects for 2023, but rather in the medium term.