The upward momentum reflected in average salaries over the past months slowed marginally in October 2024, according to the BankservAfrica Take-home Pay Index (BTPI), which tracks the average nominal take-home pay among an estimated 4-million salary earners in South Africa.
“The BTPI declined slightly to R16 895 in October, 1,7% lower than the R17 193 shown in the previous month,” says Shergeran Naidoo, BankservAfrica’s head of stakeholder engagements.
The slight moderation masks an uptick in the number of salaries paid in October, which is encouraging in an economy with a high unemployment rate – and an early indication that the better job figures for Q3 could extend into the final quarter of the year.
“However, given that the bulk of these additional salaries were in the lower salary bracket of less than R6 000 per month, the overall average has been suppressed,” says independent economist Elize Kruger.
This could also signal that jobs were created in the economy’s informal sector. StatsSA’s latest Labour Force Survey indicated that informal sector employment increased by 165 000 in Q3 2024 vs only 122 000 in the formal sector, while the unemployment rate declined to 32,1%.
In real terms, take-home pay also tracked slightly lower at R14 622 in October 2024, according to the BTPI, still representing a significant increase on the year-ago levels.
“The notable easing of consumer inflation is boosting the purchasing power of salary earners,” comments Kruger.
Headline CPI moderated to 2,8% in October, the lowest annual rate in three and a half years. Real take-home pay has risen by 2,5% in the first ten months of 2024 compared to the full-year average in 2023. In nominal terms, take-home pay has increased by 6,9% year-to-date compared to the full year in 2023.
Take-home pay, in nominal and real terms, has so far surprised to the upside in 2024, reflecting the improved business environment. The suspension of load shedding for almost eight months, combined with a notable moderation in inflation, a new political landscape, and two interest rate cuts, has provided a much-needed boost to confidence levels.
The moderation in consumer inflation has been broad-based. Specifically for October 2024, food price inflation moderated to 2,8% y/y, the lowest since May 2019, while fuel price inflation dropped by 19,1% y/y, the lowest since June 2020.
“With headline inflation expected to average at 4,5% in 2024 and similarly for 2025, the scenario bodes well for multiple years of real increases in average salaries in South Africa,” says Kruger.
This improvement in purchasing power will provide relief to cash-strapped households and, together with the fuel price relief and lower interest rates, support consumer spending in the final part of the year. Black Friday sales are also expected to benefit from the anticipated improvement in household finances.
The South African Revenue Service (SARS) recently indicated that withdrawals from the Savings Withdrawal Benefit under the two-pot retirement system have increased notably since 1 September 2024. SARS has indicated an unprecedented and steady increase in tax directive applications, likely reflecting the economic challenges faced by households. As of 18 November 2024, SARS indicated that 2,15-million directive applications were received and a total of 1,91-million directives issued with a total gross value of R35 billion. At least a portion of the net withdrawals are expected to end up in the retail spending space, boosting consumption and economic growth.
BankservAfrica data has confirmed a significant increase in the use of the savings pot opportunity. While the monthly average number of pension payments reflected in the BankservAfrica Private Pensions Index (BPPI) stood at 708 050 for the 12 months to September 2024, the October figure spiked to 964 762, or 36.3% higher. The spike was most obvious in the payments category between R20 000 and R25 000, followed by R18 000 to R20 000.
Due to the industry using the same reference for both a two-pot savings withdrawal and a normal pension payment, BankservAfrica data cannot distinguish between the two payments. As such, there is a structural break in the data and until differentiation is possible for the industry, the BPPI can no longer be interpreted as it was in the past.