The PayInc Net Salary Index, which tracks the nominal net salaries of an estimated 2,1-million salary earners in South Africa, increased marginally in January 2026, offering some good news to earners.
However, attention now turns to tomorrow’s National Budget, with expectations of potential tax relief and further measures that could bolster confidence in the economy.
“The average nominal salary was R21 506 in January 2026, representing a 2,2% growth from last year’s level,” says Shergeran Naidoo, head of stakeholder engagements at PayInc.
Although still early days, the data indicates that the upward trend in net salaries since 2024 has continued into 2026, driven by a gradual improvement in economic activity and the economy’s resilience, despite multiple challenges.
Given the moderate increase in consumer inflation, in real terms, the PayInc Net Salary Index declined by 1,4% compared to a year earlier but remained flat on a monthly basis in January at R20 644.
“With average consumer inflation forecast to remain moderate at 3,5% in 2026, following the 21-year low of 3,2% in 2025, even a modest salary adjustment could see a real increase in remuneration in 2026, lifting the purchasing power of earners and supporting the broader economy,” says independent economist Elize Kruger.
Salary earners will be particularly interested to see if there will be any tax relief in the 2026 National Budget, due to be tabled tomorrow.
Over the past two fiscal years, tax brackets were not adjusted for inflation, resulting in salary earners receiving an increase and potentially being pushed into a higher tax category, paying a higher tax rate and forfeiting part of their increase to the taxman.
SARS has estimated that this indirect tax measure could rake in R15,5-billion in additional tax revenue in FY26.
However, South Africa’s fiscal situation has improved over the past year. Combined with the record high commodity prices that fuelled corporate tax receipts, the stronger rand exchange and lower government bond yields have meaningfully contributed to reducing the cost of debt.
“Carpe Diem Research expects that the National Treasury will beat its FY25/26 budget deficit target as reflected in the Medium-Term Budget Policy Statement, deliver a faster pace of fiscal consolidation and scrap some of the additional tax measures that are already reflected in the medium-term estimates, including the R16,5-billion to be earned from bracket creep in FY27,” says Kruger.
She adds that the main focus of the 2026 Budget will be on the estimated size of the commodity windfall and government’s plans to spend this.
“With South Africa’s debt at elevated levels, and trending sideways around 77% to 78% of GDP, a prudent strategy should be in place to reduce the level of government debt, which will have the added benefit of also reducing the cost of debt,” says Kruger.
She adds: “The latter has already benefited from a stronger rand exchange rate, that reduces the value of South Africa’s foreign debt, as well as a notable drop in government bond yields. However, government is likely to take a hybrid approach, reducing the funding requirement somewhat, but also spending part of the commodity windfall on pressing expenditure priorities, while the pressure to hike taxes could be softened.”
The near-term fiscal outlook should be influenced positively by the higher precious metal prices and stronger terms of trade, with the likely solid commodity windfall delivering a smaller budget deficit in FY26/27, a bigger primary surplus, and sustained fiscal consolidation over the forecast horizon.
With the much-anticipated commodity windfall on corporate tax receipts in combination with non-interest expenditure remaining well contained, FY27 is expected to be the third consecutive fiscal year where South Africa records a primary surplus – a situation when tax revenue exceeds a country’s non-interest expenditure, reducing the shortfall to be borrowed and over time leading to consolidation in gross debt levels.
“A continuing trend of primary surpluses should bode well for ratings agencies’ perception about fiscal management in South Africa. With the number of positive economic developments building, a budget reflecting prudent fiscal management will bode well for confidence levels in South Africa,” ends Kruger.