Salaries slightly down in March but could improve

Salaries were slightly down in March due to various market and economic factors but could improve later in the second half of the year as conditions improve.

The average take-home pay, measured in the BankservAfrica Take-home Pay Index (BTPI), fell marginally in March due to factors that placed financial constraints on companies and pressure on salaries, such as the weak Rand and higher fuel prices that contributed to the strain in the economy during March.

“The average real take-home pay, adjusted for inflation, tracked lower at R14 236 in March and slightly below levels a year ago. In nominal terms, the average salary moderated slightly to reach R16 043, still 5.0% up on a year ago and 3.6% up on December’s R15 484,” says Shergeran Naidoo, BankservAfrica’s head of stakeholder engagements.

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Salaries look good compared to a year ago

A comparison of the average nominal BTPI in the first quarter of 2024 to the corresponding quarter in 2023 shows an increase of 6.2%. If this continues, 2024 could be a better year for salaries as the business environment is expected to improve somewhat, unlike the previous two years, when companies struggled to pay inflation-related increases due to the ongoing economic challenges, Elize Kruger, an independent economist, says.

“Although mediocre economic growth of 1.1% is forecast for 2024, it is somewhat better than the 0.6% in 2023. The improved outlook hinges on the assumption of reduced load shedding, a moderation in average inflation and a start to the interest rate-cutting cycle.”

Year to date, BankservAfrica data signals alignment with the South African Reserve Bank (Sarb)’s forecast of an average salary increase of 6.1% for 2024, she says.

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Workers with long-term agreements can score if inflation falls

Kruger points out that a trend developed recently, especially in the mining industry, where companies enter into longer-term wage agreements, mostly with above-inflation outcomes for salary earners.

“With the average headline inflation forecast to moderate to 5.3% in 2024 and 4.8% in 2025, workers locked into these agreements will receive considerable real increases if lower inflation outcomes do realise.”

Inflation has turned out to be quite sticky on the downward path, locally and globally, driven mostly by higher services and administered price inflation, she says.

“Headline inflation moderated notably from 7.1% in March 2023 to 5.3% a year later but is forecast to remain around the 5.3% to 5.5% level until September and below 5% by year end.”

Kruger says positive real increases in average salaries in 2024 would be a welcome development as salaried workers’ purchasing power will improve somewhat compared to the previous two years. Together with lower interest rates, financially stressed households’ spending ability and confidence levels could improve. However, she points out, this may only happen in the second half of the year.

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Private pensions also down, but not much

The BankservAfrica Private Pensions Index also ticked lower in nominal and real terms in March but remained comfortably above the levels of a year ago. The average nominal private pension moderated to R10 710 in March compared to the previous month’s R10 811, but it was still 6.5% higher than a year earlier, says Naidoo.

“Similarly, the real average private pension increased by 1.1% in March 2024, compared to a year earlier, keeping its recent inflation-beating track record. “

The BankservAfrica data signals that the purchasing power of pensioners represented in the BankservAfrica sample (predominantly ex-government employees) has mostly been preserved amid the still elevated inflation environment, he says.