In May 2024, the average nominal salary, as measured by the BankservAfrica Take-home Pay Index (BTPI), showed a partial recovery to once again beat levels from a year ago.

“The nominal take-home pay reached R15 888 in May, showing a 10% improvement on year-ago levels,” says Shergeran Naidoo, BankservAfrica’s head of stakeholder engagements. “Salaries were, though, still slightly below February and March levels.”

In real terms, salaries adjusted for inflation, tracked slightly higher at R14 015 in May – or 4,5% up on year-ago levels.

The business environment has improved meaningfully compared to 2023, with no load shedding experienced over the past three months, positively influencing companies’ ability to pay better salary increases in 2024.

“A comparison of the average nominal BankservAfrica Take-home Pay Index for the five months to May 2024, to the corresponding period one year earlier, revealed a 6.8% increase and a 1,4% growth in real terms,” says independent economist Elize Kruger. “If 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%.”

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 versus 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% in 2022.

In the last 18-24 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% y/y 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.

Given that forecasts suggest that headline inflation is likely to average at about 4,3% in Q4 2024 and close to the midpoint of the 3% to 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 25bps cuts in interest rates are possible by year-end and could alleviate the pressure on households with credit exposure somewhat while stimulating retail expenditure,” says Kruger.

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, still 3,7% higher than a year earlier,” says Naidoo. In real terms, the average BankservAfrica BPPI for May 2024 dipped 1,4% below a year earlier, partly influenced by a high base calculation.

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 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.