Take-home pay reached its highest peak in 10 months in June, and beat inflation for the third time.
According to the monthly BankservAfrica Take-home Pay Index, the likelihood of inflation remaining at low levels brings further good news for the short-term by helping employees to stretch their earnings in the forthcoming months. However, more improvement is needed for real change to the South African economy.
“In June, South African take-home pay increased in real-terms by 2% year-on-year,” says Shergeran Naidoo, head of stakeholder engagements at BankservAfrica.
A major contributing factor to this increase was the 2019 national elections in May where there were an estimated 235 000 temporary salary payments made to contracted workers. This is based on preliminary information sourced from the IEC.
Although the exact number will only emerge when the IEC’s Election Report for 2019 is released, the real number is likely to be close to this especially because of the increase in the number of polling stations.
“Overall total payments in nominal terms increased by over 6% in June, arresting the slowdown in total nominal payments made over the last 10 months,” says Naidoo. Again, this is owed to the temporary payments to staff who were contracted during the elections. Many were government employees and a substantial number were previously unemployed – or did not have regular formal income.
“As such, the overall take-home pay increased, which the BankservAfrica index made allowance for in the average take-home pay numbers and percentage change numbers,” he says.
“The real seasonally adjusted take-home pay for June was R13 890. In today’s money, this was R15 270.”
Naidoo adds that a 6,5% nominal year-on-year improvement was also recorded.
“The annual positive change is due to the late government wage increase last year. Although negotiations ended in June, the new salaries were only paid in July and August. Therefore, the lagging change from a year ago is the reason for June’s increase,” explains Mike Schüssler, chief economist at economistscoza.
These could give a boost to consumer spending. “The very fact that the banked wage income is rising points to a temporary growth in consumer spending for June – and most likely in July as well,” says Schüssler.
The BankservAfrica Private Pensions Index (BPPI) showed a 5,6% increase in June – the highest since February 2018, to reach an average of R7 390, according to Naidoo. He adds that without taking inflation into account, the average seasonally adjusted banked pension was R8 600 in June.
June also represents the third consecutive month where private pensions increased by over 5% on a year-on-year basis in real terms. Furthermore, it is the 28th consecutive month of real positive increases for pensions that equal the record set between August 2014 and November 2016, according to Schüssler.
The BPPI measures the majority of banked pensions (after deductions) in South Africa and for June, the number of pensions (retirement annuity or private pension) paid into the South African National Payments System was estimated to be 709 000. It is estimated there are 1-million private pensioners in South Africa at present.