Salaries decline for first time since July in October

Average salaries declined for the first time since July in October after three consecutive months of increases, with the nominal average take-home pay coming in at R15 535, somewhat lower than the R15 691 recorded in the previous month.

According to the BankservAfrica Take-home Pay Index (BTPI), which measures the average nominal take-home pay among about 4 million salary earners in South Africa, showed a slight downturn.

“After stabilising in the second quarter, nominal salaries increased notably despite the numerous economic challenges. The nominal BTPI is still a healthy 6.6% higher than it was in January this year and 3.9% higher in real terms, signalling the erosion of purchasing power has eased compared to early 2023,” Shergeran Naidoo, BankservAfrica’s head of stakeholder engagements, says.

However, Elize Kruger, an independent economist, says on a year-to-date basis, this is less impressive, with the average nominal BTPI of R15 197 only 0.4% higher than the corresponding period in 2022, while in real terms, the average BTPI is still 5.5% lower year-to-date compared to 2022.

“The BankservAfrica data confirms that companies’ ability to pay inflation-related salary increases was hampered over the past 18 months, especially given significant increases in the operating cost environment, partly due to the impact of load shedding and global factors.

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Inflation not only factor for salaries

“This is in line with the Remchannel Bi-annual 2023 Salary and Wage Movements survey, published in July, which revealed similar trends and alluded to the finding that CPI is no longer the main determinant of salary increases,” Kruger says.

After moving into positive territory for two consecutive months, annual growth in the average real take-home pay retracted in September and decreased further in October, reflecting a sharp uptick in headline inflation. 

The real take-home pay of R13 942 in October 2023 was somewhat lower than September’s R14 226, while it was 3.4% below the level of a year ago.

“The renewed erosion in purchasing power has been driven by sharp fuel and food price increases that pushed headline CPI to 5.4% in September and to 5.9% in October,” Kruger says.

However, lower international oil prices and a slightly stronger rand exchange rate resulted in a partial reversal of recent fuel price increases in early November and sizeable drops are on the cards for early December. 

Consumer inflation is forecast to average around 6.0% in 2023, compared to a 13-year high of 6.9% in 2022, and should moderate to average around 5.2% in 2024, according to Kruger.

“While the interest rate cycle has likely plateaued, it could remain elevated in the next months.  With household finances already under severe pressure, this scenario remains negative for consumers’ spending ability and confidence levels.”

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Moderate uptick in job market according to salaries

In addition, Statistics SA’s recently released Labour Force Survey for the third quarter confirmed indications from BankservAfrica’s sample, which represents about 25% of the broad labour market. According to the survey, 399 000 jobs were created in the third quarter, while the official unemployment rate moderated to 31.9%, down from 32.9% a year earlier.

“Adjusted for weekly payments, BankservAfrica’s data indicates a further moderate uptick in the job market for October, providing a promising start to the fourth quarter,” Kruger says.

The BankservAfrica Private Pensions Index (BPPI) slipped marginally in nominal and real terms in the three months to October but remains in positive territory on an annual basis. “The average nominal private pension was R10 757 in October, compared to the previous month’s R10 797. It remained a healthy 6.5% higher than one year earlier,” Naidoo says. 

In real terms, the average private pension in October 2023 came to R9 649, 0.6% higher compared to a year earlier, signalling that the purchasing power of pensioners represented in the BankservAfrica database has largely been preserved amid the high inflation environment, he says.