July also better month for salaries in SA

After the good news about the inflation rate in July, it seems that July was also a better month for salaries as the latest data reveals improved take-home pay, although underlying issues in the economy, such as the high unemployment rate, persist.

According to the BankservAfrica Take-home Pay Index (BTPI), the average nominal take-home pay improved significantly in July amid the better business environment and recovering confidence levels.

“The average nominal take-home pay reached R16 358 in July, increasing by 5.9% compared to a year ago,” says Shergeran Naidoo, BankservAfrica’s head of stakeholder engagements. In real terms, salaries adjusted for inflation tracked higher to R14 440 in July 2024, showing a 0.9% year-on-year growth.

“While not reflecting linear growth, take-home pay has so far surprised to the upside in 2024, reflecting an improved business environment. The reprieve from load shedding for almost five months, moderating inflation, a new political landscape and the prospect of lower interest rates as soon as September, have all provided a much-needed boost to confidence,” Elize Kruger, an independent economist, says.

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Salaries in first 7 months of 2024 compared to 2023

A comparison of the average nominal BTPI for the first seven months of 2024 to the same period in 2023 shows an increase of 6.6%. In real terms, there was an increase of 1.2%.

“If this trend is sustained for the rest of the year, 2024 will likely be the best year for salaries since 2020 with the increase in average nominal BTPI beating inflation. Improved buying power will go some way to support cash-strapped household budgets,” Kruger says.

However, she says the encouraging take-home pay data masks the stark reality that the unemployment rate increased in the first half of 2024, with 73 000 job opportunities lost compared to the end of 2023.

The unemployment rate increased from 32.1% in the fourth quarter of 2023 to 33.5% in the second quarter of 2024, the highest in two years. It has become clear that the better outcome of salary increases was most likely detrimental to existing opportunities in some instances. Vast differences between different economic sectors are apparent, Kruger says.

“The South African economy is in urgent need of an enabling environment that could foster accelerated growth and drive much-needed job creation.” 

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Progress with Operation Vulindlela

She points out that the progress made in the first phase of Operation Vulindlela to accelerate structural reforms and boost economic growth boosted confidence.

“The first phase of the initiative fast-tracked reforms that accelerated the roll-out of privately-owned energy generation capacity, laid out plans to remedy the country’s collapsing freight rail lines and ports and also outlined approaches to unblock the work permit system.”

The second phase of Operation Vulindlela, with the firm support of the government of national unity (GNU), will focus on reviving municipalities and addressing issues related to housing, public transport and digital infrastructure.

Kruger says these efforts will likely boost household and corporate confidence levels and subsequently productivity levels in the economy, adding momentum to the evolving positive trend.

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Private pensions fell slightly

The BankservAfrica Private Pensions Index (BPPI), tracking the pension payments to about 700 000 pensioners, moderated in nominal and real terms in July 2024.

“The average nominal private pension subsided to R11 180 in July 2024, unlike the previous month’s R11 270 but this was still 2.1% higher than a year earlier,” says Naidoo. In real terms, the average BankservAfrica BPPI for July 2024 moderated on a monthly basis and dipped 2.4% below a year earlier.

A comparison of the average nominal BPPI for the first seven months of 2024 to the same period one year earlier showed a 5.2% increase. The real BPPI remained flat compared to the same period in 2023.

“These movements suggest that average private pension payments have managed to stay on track with the average inflation so far in 2024, With the two-pot retirement system set to be implemented on 1 September 2024, the pension industry is currently in sharp focus,” Kruger says.