More salaries paid in October, as well as spike in pension payments

More salaries were paid in October but it was masked by the fact that slightly smaller amounts were paid. There was also a spike in pension payments that indicate more payments under the two-pot retirement system.

According to the BankservAfrica Take-home Pay Index (BTPI), which tracks the average nominal take-home pay among an estimated 4 million salary earners in South Africa, the upward momentum reflected in average salaries over the past few months slowed marginally in October.

 “The BTPI declined slightly to R16 895 in October, 1.7% lower than the R17 193 paid in September,” Shergeran Naidoo, BankservAfrica’s head of stakeholder engagements, says.

This slight moderation masks an uptick in the number of salaries paid in October, which is encouraging in an economy with a high unemployment rate and an early indication that the better job figures for the third quarter could extend into the final quarter of the year, Elize Kruger, an independent economist, says.

“Given that the bulk of these additional salaries were in the lower salary bracket of less than R6 000 per month, the overall average has been suppressed.”

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More salaries could signal more informal jobs

She says this could also signal that jobs were created in the economy’s informal sector. Statistics SA’s latest Labour Force Survey indicated that informal sector employment increased by 165 000 in the third quarter and only 122 000 in the formal sector, while the unemployment rate decreased to 32.1%.

Although take-home pay also tracked slightly lower in real terms at R14 622 in October, it still represents a significant increase compared to a year ago.

Kruger says the notable easing of consumer inflation is also boosting the purchasing power of salary earners.

She points out that headline inflation moderated to 2.8% in October, the lowest annual rate in three and a half years, while real take-home pay increased by 2.5% in the first 10 months of 2024 compared to the full-year average in 2023.

In nominal terms, take-home pay increased by 6.9% year-to-date compared to the full year in 2023.

“Take-home pay, in nominal and real terms, has so far surprised to the upside in 2024, reflecting the improved business environment. The suspension of load shedding for almost eight months, combined with a notable moderation in inflation, a new political landscape and two interest rate cuts has provided a much-needed boost for confidence levels.”

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Lower inflation also good for household finances

She also points out that the moderation in consumer inflation has been broad-based. In October food price inflation moderated to 2.8%, the lowest since May 2019, while fuel price inflation dropped by 19.1%, the lowest since June 2020.

“With headline inflation expected to average at 4.5% in 2024 and similarly for 2025, the scenario bodes well for multiple years of real increases in average salaries in South Africa. This improvement in purchasing power will provide relief for cash-strapped households and together with the fuel price relief and lower interest rates, support consumer spending in the final part of the year.

“Black Friday sales are also expected to benefit from the anticipated improvement in household finances.”

The South African Revenue Service (Sars) recently indicated millions of withdrawals from the savings benefit under the two-pot retirement system since 1 September 2024. Sars received an unprecedented and steady increase in tax directive applications, likely reflecting the economic challenges households face.

By 18 November Sars received 2.15 million directive applications and already issued a total of 1.91 million directives with a total gross value of R35 billion.

Kruger says at least a portion of the net withdrawals are expected to end up in the retail spending space, boosting consumption and economic growth.

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Increase in two-pot retirement system payments

BankservAfrica data confirms a significant increase in consumers using the two-pot retirement system opportunity. While the monthly average number of pension payments reflected in the BankservAfrica Private Pensions Index (BPPI) stood at 708 050 for the 12 months to September 2024, the October figure spiked to 964 762, or 36.3% higher.

The spike was most obvious in the payments category between R20 000 and R25 000, followed by R18 000 and R20 000, Naidoo says.

“Due to the industry using the same reference for a two-pot retirement system savings withdrawal and a normal pension payment, BankservAfrica data cannot distinguish between the two payments. As such, there is a structural break in the data and until differentiation is possible for the industry, the BPPI can no longer be interpreted as it was in the past.”