Average take-home pay slightly up in June

Average take-home pay increased slightly in June, while private pensions also stronger despite the tough current economic conditions due to ongoing rolling blackouts, rising interest rates, a lacklustre job market and low confidence levels.

According to the BankservAfrica Take-home Pay Index (BTPI) the average take-home pay stabilised observed over the past three months. The average nominal take-home pay for June was R14 596 exceeding the R14 579 level shown in June 2022 and fairly higher than the R14 483 in May 2023.

However, the job market remained uninspiring as indicated in BankservAfrica’s data adjusted for weekly payments. With fewer salaries paid into the bank accounts of South Africans in each of the past three months, cumulative job losses of almost 200 000 were recorded in the second quarter of 2023.

“With little indication that a different economic environment will play out in the second half of 2023, the job market and salary adjustment are likely to remain lacklustre in the remainder of 2023, a scenario that could only exacerbate South Africa’s unemployment crisis,” says Elize Kruger, an independent economist.

Indications that some industries have become progressively more resilient to the effects of rolling blackouts is an underlying positive development in an otherwise dismal environment, Kruger says.  

The South African Reserve Bank recently also upwardly revised its real gross domestic product (GDP) growth forecast for 2023, as have other forecasters, in response to the observed resilience.

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Take-home pay still in negative territory

Although the average real take-home pay remains in negative territory in June compared to June last year, it was less so compared to the previous two months. The real average take-home pay, according to the BTPI, increased to R13 522 in June, 0.8% higher than in May 2023 but still 5.7% lower than the R14 336 recorded in June 2022.

“Salary earners had to deal with a double whammy during the past year of disappointing average nominal wage increases and high consumer inflation. The erosion of households’ buying power was evident in declining retail sales. StatsSA recently indicated that real retail sales for the first five months of 2023 are 1.2% below the corresponding period in 2022,” Kruger says.

The latest Altron FinTech Household Resilience Index (AFHRI), which provides more clarity on the financial disposition of households and their ability to cope with debt, confirmed the observations from BankservAfrica’s BTPI.

The AFHRI similarly indicated that household financial resilience declined by 2.4% in the first quarter, compared to the fourth quarter of 2022 and by 1.8% year-on-year, with South African households now worse off than pre-Covid-19.

The report indicated that average monthly remuneration in South Africa declined in nominal terms by 4.4% compared to the first quarter of last year in the first quarter, from R16 192 in 2022 to R15 473 in 2023), while in real terms, the decline was 10.7%.

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Less pressure on salary earners soon?

Kruger says although it is not definitively evident in the data yet, the pressure on salary earners could soon alleviate somewhat based on the notable moderation in consumer inflation from 7.1% in March to 5.4% in June, the first print back in the South African Reserve Bank’s 3-6% target band since April 2022.

“The moderation in consumer inflation will go some way to reduce the extent of the erosion of buying power that households had to deal with, especially in the past year,” Kruger says. Current forecasts suggest that headline inflation could be at 5.0% in July and average around 5.2% in the second half of 2023, which could bring more good news.”

On the other hand, the BankservAfrica Private Pensions Index (BPPI) ticked up in both nominal and real terms during June, continuing its outperformance trend.

“The average nominal private pension increased to R10 734 in June compared to the previous month’s R10 285, 7.2% higher than one year earlier and the highest monthly payment so far in 2023,” says Shergeran Naidoo, BankservAfrica’s Head of Stakeholder Engagements.

In real terms, the average real private pension in June 2023 came to R9 825, 1.7% higher than a year earlier. Kruger believes this signals that the buying power of pensioners was largely preserved amid the high inflation environment.