SA salaries recovered slightly in May 2024

Salaries recovered slightly in May 2024, continuing to outperform 2023 levels. The average nominal salary showed a partial recovery to once again beat levels from a year ago thanks to the business environment improving meaningfully compared to 2023.

The absence of load shedding over the past three months had a positive influence on companies’ ability to pay better salary increases in 2024.

BankservAfrica’s head of stakeholder engagements Shergeran Naidoo says the nominal take-home pay, as measured by the BankservAfrica Take-home Pay Index (BTPI), reached R15 888 in May, showing a 10% improvement on the levels from a year ago levels.

“However, salaries were still slightly below February and March levels,” says Naidoo.

In real terms, salaries adjusted for inflation tracked slightly higher at R14 015 in May, or 4.5% up on year-ago levels.

“Comparing the average nominal BankservAfrica Take-home Pay Index for the five months to May 2024 to the corresponding period in 2023 shows a 6.8% increase and a 1.4% growth in real terms,” says Elize Kruger, an independent economist.

“If it is sustained throughout the year, 2024 could turn out to be a notably better year for salaries, unlike 2023, when the average nominal BTPI increased by only 1.2%.”

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Trends in salaries in line with Reserve Bank predictions

She says the trends emerging from the BankservAfrica dataset are consistent with the South African Reserve Bank’s forecast of an average salary increase of 6.1% for 2024 compared to an estimated 3.9% increase for 2023 for formal non-agricultural workers.

Specialist labour law practice, Andrew Levy & Associates, also flagged a higher collective wage settlement level for 2024 – between 6.5% and 7.2% – compared to the actual average wage settlement rate in collective bargaining agreements of 6.3% in 2023 and 6.0% in 2022.

Kruger says over the past 18 to 24 months, the average household budget in South Africa has been under immense pressure arising from escalating inflation, a sharp upward trend in interest rates and coinciding with nominal wage increases failing to keep up with average inflation since 2021.

“While the consumer inflation rate has moderated from an upper turning point of 7.8% in July 2022 to 5.2% in May 2024 and positive trends have emerged on wages, interest rates remain stuck at a 15-year high,” she points out.

She says given that forecasts suggest that headline inflation is likely to average at about 4.3% in the fourth quarter of 2024 and close to the midpoint of the 3-6% target band in 2025, while the Rand exchange rate has also strengthened notably in recent weeks, commencing an interest rate cutting cycle by no later than the September Monetary Policy Committee meeting should be considered.

“Two 25 basis points cut in interest rates are possible by year-end and could alleviate the pressure on households with credit exposure somewhat while stimulating retail expenditure,” Kruger says.

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Private pensions slightly lower

The BankservAfrica Private Pensions Index (BPPI), which tracks pension payments to about 700,000 pensioners, ticked marginally lower in nominal and real terms in May 2024.

“The average nominal private pension moderated to R10 660 in May 2024 compared to the previous month’s R10 674, but still 3.7% higher than a year earlier,” Naidoo says.  In real terms, the average BankservAfrica BPPI for May 2024 dipped 1.4% below a year earlier, partly influenced by a high base calculation.

Kruger points out that the pension industry is currently in sharp focus with the two-pot retirement system due to be implemented on 1 September 2024. Contributions to retirement funds will then be split with one-third allocated for a ‘savings component’ and two-thirds for a ‘retirement component’.

“The reform is likely going to create greater awareness among members about their retirement savings, which is welcomed and helpful,” says Kruger.