Take-home pay for South Africans declined in April as the tougher economic environment slowed payment growth. This has had a direct impact on the relationship between salaries and retail sales, which reached a significant low, and reflects the struggles of consumer spending.
“Real take-home pay decreased by 1,5% for the year to April and represents the third consecutive month of declines,” says Shergeran Naidoo, Head: Stakeholder Engagements at BankservAfrica.
Naidoo adds that real take-home pay averaged R13 741 in April. Although March’s figures were revised and seasonally adjusted, the average take-home pay amounted to R13 829, showing that even with the adjustments, April’s figures were still lower.
“All indications show that consumers are likely to remain under pressure as inflation slows slightly,” says Mike Schüssler, chief economist at Economistscoza. “April’s decline is likely to be from tax brackets not being adjusted for inflation. We believe that public service salary increases of between 5,2% and 6,2%, as announced by government, will have a very big impact on these numbers. If government wage increases were implemented, this would mean private sector increases have been far below the inflation rate of 4,4% in April.”
Government’s payroll makes up close to 30% of BankservAfrica’s Take-home Pay Index sample.
BankservAfrica’s Take-home Pay Index deflated with retail price changes. The Retail Price Index below demonstrates the relationship between salaries and real retail sales. Apart from periods where salaries declined due to wage adjustment delays or strike action, the take-home pay direction leads the retail sales trend (at times the trend was higher due to back payments).
“It is clear that employee salaries are not increasing at the same pace as before. Also, for the first time, salary adjustments are in decline when deflated with the Retail Price Index,” says Schüssler. The Retail Price Index measures inflation in shops, not the total consumer inflation that includes electricity, rent, property taxes, schooling and health care costs.
Private pensions increase again
Private pensions paid into South African bank accounts increased by 5,2%, according to Naidoo. “This is the largest growth since June 2018.” Naidoo adds that the average private pension paid into bank accounts was R7 317 for April. “Although this is not the highest average on record, it was R355 more than the average in March, on a seasonally adjusted basis.”
“Interestingly, private pensions have increased substantially over the last few years despite a very poor performance of the South African equity market,” says Schüssler.
Meanwhile, the total salaries and pensions (of payments under R100 000) declined in nominal terms by 0,9%. This is partly due to less salary and pensions payments being processed by the National Payments System and smaller salary increases in recent months.
“Less payment growth is indicative of a tough economic environment and a difficult period in any economy. In an economy that has a very high unemployment rate, this is not ideal as many people will have to do with less,” ends Schüssler.