Salaries recover in July despite interest rates and ongoing rolling blackouts

There was a welcome recovery in salaries in July for the second month in a row despite the challenges in the South African economy, such as the ongoing rolling blackouts, elevated interest rates, a lacklustre job market and low confidence levels.

It also seems that some industries have become more resilient to the effects of load shedding and have become the underlying positive in recent months.

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According to the BankservAfrica Take-home Pay Index (BPTI), the average salary performed better in July 2023, providing welcomed relief for South African income earners.

“The average nominal take-home pay in July was R15,503, notably higher than the R14,169 in June this year and R14,509 in July 2022,” says Shergeran Naidoo, BankservAfrica’s head of stakeholder engagements.

The average real take-home pay came out of its prolonged slump, growing by 1.2% year-on-year to show the first positive growth rate since September 2021

ALSO READ: Average take-home pay slightly up in June

Elize Kruger, an independent economist, says this is the first glimmer of hope for salaries driven by the notable moderation in consumer inflation. However, she warns, this may not be a sustainable trend.

“The renewed pressure on fuel prices has surfaced again and the depreciation of the rand exchange rate will add to the cost of imported products, pushing inflation higher.

Moderating inflation helped salaries

Consumers benefitted from consumer inflation moderating from 7.1% in March to 5.4% in June, helping to reduce the erosion of households’ purchasing power. However, this may be short-lived.

Despite expectations for headline inflation to be at around 5% in July, the sizeable fuel increases on the cards for September could push headline inflation again towards 6%. With these developments, the South African Reserve Bank may decide to hike interest rates at the next MPC meeting in September.

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“With household finances already under severe pressure, these changes would be very negative for consumers and their spending power,” Kruger says.

More than 63,000 salaries were paid in July 2023 but these were not enough to offset the previous month’s losses. With little indication that the second half of 2023 will be significantly different to the first half, the job market is likely to remain lacklustre for the remainder of the year.

The BankservAfrica Private Pensions Index (BPPI) ticked up further in both nominal and real terms during July, continuing its solid performance, with the nominal average private pension increasing to R10,943 in July compared to the previous month’s R10,776, 7.5% higher than one year earlier and the highest monthly payment so far in 2023. 

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“In real terms, the average real private pension in July 2023 came to R9,971, 2.3% higher compared to a year earlier. These developments suggest private pensions have held up well despite rising inflation,” Naidoo says.