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The outlook for take-home pay for the future is not that great as global and local political uncertainty start to affect employers.
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The decrease in take-home pay in March reflects the mounting economic pressure not only on South Africa but also on the rest of the world, with local growth prospects weighing on confidence.
There is concern that this could negatively affect employment and earnings.
According to BankservAfrica, the average nominal take-home pay slipped in March as intensifying local and global economic headwinds continue to pressure growth prospects and confidence levels, raising concerns over potential impacts on employment and earnings in the coming months.
Shergeran Naidoo, head of stakeholder engagements at BankservAfrica, says the average take-home pay declined to R17 811 in March, 2.5% lower compared to February’s R18 272, but still notably above the level of R15 983 a year earlier, reflecting the improving economic environment.
However, he says, this outlook will likely shift as escalating trade tensions and growing political uncertainty are expected to affect the economy and salary earners in the near term.
Real take-home pay, adjusted for inflation, also moderated by 2.9% to R15 343 in March compared to R15 793 in February, still a notable 8.1% up on year-ago levels. Nominal take-home pay is the amount employers pay employees for their work and is not adjusted for inflation, while real take-home pay is a wage adjusted for inflation.
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Elize Kruger, an independent economist, says the significant moderation in consumer inflation during 2024 had a notable positive impact on the purchasing power of salary earners. “This trend has carried into 2025, with headline inflation easing to just 2.7% in March, the lowest level since June 2020.”
Headline inflation is now forecast to average at around 3.4% in 2025 compared to 4.4% in 2024, reaching the lowest annual rate since the 3.3.% recorded in 2020.
She says while the rand exchange rate weakened sharply amid the escalating trade war and resultant global risk-off sentiment, it has since recovered much of its losses, partly due to the US dollar’s depreciation and could, in combination with the lower international oil price, actually be deflationary over the short term.
“On the assumption that inflation will remain well-contained, 2025 will likely be the second consecutive year of positive real take-home pay growth, supporting demand in the economy. This relief is much needed, as salary earners remain under strain from the high cost of living, persistently elevated interest rates and additional tax burdens because the tax brackets were not adjusted in Budget 2025.”
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However, she says, the decision by the finance ministry to withdraw the proposed VAT increase will come as welcome relief to already financially strained South Africans and will probably lift confidence levels somewhat.
Kruger points out that the combined effect of escalating global trade tensions and domestic political uncertainty has sharply dented consumer confidence in the first quarter. “Salary earners may become more cautious with their spending, despite having greater purchasing power. This shift is already reflected in the recent moderation of real retail sales.”
While the direct impact of the punitive import tariffs imposed by US President Donald Trump on South Africa is limited to around 8% of total exports, some sectors will feel the impact more severely, particularly those that enjoyed duty-free access to US markets under the African Growth and Opportunity Act (Agoa), she says.
“In those sectors, including automotive, manufacturing and agriculture, the anticipated negative impact on businesses is likely to filter through to the workforce in the form of constrained opportunities and earnings pressure.”
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However, Kruger says, the bigger negative impact on South Africa will likely emerge from the indirect effect of the trade war on the global economy at large and specifically on its major trading partners. The International Monetary Fund (IMF) this week revised South Africa’s expected growth rate down to just 1% for this year, matching the view of Carpe Diem Research Services, which projects a rise to only 1.3% in 2026.
“It forecasts global growth of just 2.8% this year, down from 3.3% in 2024 and well below its 3.7% long-term average. The IMF has trimmed its global and South African growth forecasts by 0.5% compared to its January forecasts.
“However, its outlook for the US took an even bigger hit, slashed by 0.9% to just 1.8% for 2025. Although global growth remained well above recession levels, all regions were negatively affected, and the IMF indicated that the risk of a global recession had increased to 30%, from 17% in October 2024.”
Kruger says while uncertainty remains exceptionally high, the current low inflation environment, supported by lower international oil prices and the rand’s recovery, offers an opportunity for monetary policy to play a role in offsetting some of the economic impact of recent global shocks.
“Given that real interest rates remain unusually high for an economy stuck in a low-growth cycle, the South African Reserve Bank could lower interest rates further without compromising its mandate to keep inflation within the 3-6% target range.”
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