August salaries up 5.8% compared to 2022 despite tough economy

Salaries paid in August increased 5.8% compared to the same month in 2022, with the average nominal pay at R15 578 compared to R14 717 a year ago.

The August figure was also higher than July’s R15 525.

According to BankservAfrica’s Take-home Pay Index (BTPI), the latest data also reflects some good news for the local job market in the third quarter. The data adjusted for weekly payments suggests a slight improvement in the job market in the third quarter.

The BankservAfrica sample shows about 187 500 more salaries were paid in July and August, almost offsetting the losses of 198 000 in the second quarter, but also confirming the sideways trend in the number of salaries paid so far in 2023.

After stabilising in the second quarter, nominal salaries improved in July and August despite the unchanged economic narrative as some industries became progressively more resilient to the challenges effects of load shedding, Shergeran Naidoo, BankservAfrica’s head of stakeholder engagements, says.

Naidoo says the S&P Global South Africa Purchasing Managers’ Index (PMI) hit above 50.0 in August, the first time in six month. This signals improved conditions in the private sector.

“If sustained, this could be a supportive factor for employment and remuneration prospects.”

The average real take-home pay increased 0.9% over the past year, only the second positive annual growth rate since September 2021. However, the real take-home pay at R14 284 in August 2023 is marginally lower than July’s R14 346.

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Increase in salaries partly due to moderation in inflation

“While the somewhat higher levels of real take-home pay in the past two months are heartening, it was partly driven by a notable moderation in consumer inflation,” says Elize Kruger, an independent economist.

Headline consumer inflation moderated from 7.1% in March to 4.7% in July and ticked up marginally to 4.8% in August, reducing the extent of the erosion of households’ purchasing power.

Naidoo says although the inflation rate is now back into the 3-6% target band of the South African Reserve Bank (Sarb) for three consecutive months, an unwelcome U-turn is on the cards.

“With estimates of petrol and diesel price increases at around R1.00/l and R1.50/l in early October, the cumulative increases over the most recent three months would be about R3/l for petrol and a notable R5/l for diesel,” Kruger says.

“These increases will no doubt push headline inflation into a range of 5.5% to 5.9% for the next few months. Still, consumer inflation is forecast to average at 6.0% in 2023 compared to a 13-year high of 6.9% in 2022 and should then moderate further to average around 5.2% in 2024.”

She points out that while the interest rate cycle has probably reached its plateau, the Sarb is aware of the upside inflation risks posed by the renewed rand depreciation and higher fuel prices.

“This will result in interest rates remaining elevated for some more months, with all other challenges remaining. With household finances already under severe pressure, this scenario remains negative for consumer spending and confidence levels.”

With the economic realities largely unchanged into the second half of the year, the job market is likely to remain lacklustre in the remainder of 2023, Kruger says.

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Pension payments still in positive territory

The BankservAfrica Private Pensions Index (BPPI) slipped marginally in nominal and real terms during August but remains in positive territory on an annual basis.

“The average nominal private pension moved to R10 741 in August compared to the previous month’s R10 983, but still 6.2% higher than one year earlier,” says Naidoo. 

In real terms, the average private pension in August 2023 came to R9 773, 1.3% higher compared to a year earlier, signalling the purchasing power of pensioners, represented in the BankservAfrica database, has held up despite the high inflation environment.