South African salaries and pensions have increased above the rate of inflation for the sixth consecutive month, with salaries improving by an average of 1,1%, after inflation, compared with August last year, while pensions grew by 0,9% in real terms.

Mike Schüssler, chief economist at Economists dotcoza, points out that the increases recorded by the BankservAfrica Disposable Salary Index (BDSI) and the BankservAfrica Private Pension Index (BPPI) are lower than previous months. This is partly due to slightly higher inflation rates in August. Real sustained increases may decline further as inflation is expected to rise in the coming months off the back of higher oil prices.

“Real increases in both salaries and pensions may, however, have seen their highest respective increases earlier this year with salaries peaking at 2,5%, in July, and pensions hitting 3,7%, in May,” he says.
Real term disposable salaries remain below the October 2015 high of R14 212 coming in at about R13 900 in August this year. This is owing to high inflation and low salary increases during 2016 to the beginning of 2017.

“When looking at percentage increases, pensioners have in general fared better than salary earners, however, they receive less than half the income of formal sector employees. Both the average and median income of pensioners have increased above that of employees paid by employers. The average pension remains at just over 48% of average disposable salaries,” Schüssler says.

According to BankservAfrica’s data, pensioners’ real-term take-home income was only R9 lower than the record set in April this year. According to Schüssler, pensioners are unlikely to see high increases in future, largely because pensions are tied up in money market instruments and property funds, which are expected to provide lower returns.

Meanwhile, take-home pay for employees earning less than R100 000 per month averaged R14 106 in nominal terms during August, while pensioners received an average of R6 759 in nominal terms.

The median disposable salary as measured within the South African payments system remains above 75% of the average disposable salary for a second consecutive month, which could be an indication of the wage gap narrowing in the formal sector excluding executives.

The positive growth in both the BDSI and the BPPI indicate that the increase in real retail sales and overall consumer spending may be more sustainable compared with last year.

“At least the positive increase for both sets of earners will help the economy in the third quarter, although at a slower rate than in the second quarter,” Schüssler says.