The average nominal take-home pay slipped in June, according to the BankservAfrica Take-home Pay Index (BTPI), which tracks about 4-million salary earners in South Africa.
“At R15 492, the average nominal take-home pay for June was down from May, but still 6% up on YoY levels,” says Shergeran Naidoo, BankservAfrica’s head of Stakeholder Engagements. In real terms, salaries adjusted for inflation tracked lower monthly at R13 634, and only 0,7% up on year-ago levels.
An analysis of the first six months of the year reveals that 2024 remains on course to be the first year since 2020 in which the increase in average nominal take-home pay beats inflation. With no load shedding over the past four months and inflation moderating, the business environment has improved meaningfully compared to the previous year, positively influencing companies’ ability to pay better salary increases in 2024.
When comparing the average nominal BankservAfrica Take-home Pay Index for the first half of 2024 to the corresponding period one year earlier, a 6,7% increase was revealed. A similar comparison in real terms showed a 1,3% increase.
“If this trend could be sustained throughout the year, 2024 will be the first year in which the increase in average nominal take-home pay beats inflation since 2020,” says Elize Kruger, independent economist.
The trends emerging from the BankservAfrica dataset are in-line with the views expressed by other institutions. Remchannel, which forms part of Old Mutual’s employee remuneration and benefits solutions, indicated in its April 2024 Salary and Wage survey that average pay increases granted so far this year at local companies averaged 6,1%, beating consumer price inflation.
The Remchannel report notes that the cost-of-living crisis in South Africa has forced businesses to reassess their strategies for attracting and retaining talent by re-evaluating their employee benefits. More employers were giving employees early access to their salaries – “earned wage access” – subject to financial education. This means that employers are now paying workers more frequently than once a month and helping them to manage their needs more effectively.
Employees are also taking advantage of the flexibility offered by their pension contribution plans resulting in many opting for the lowest level offered in their salary structures to maximise their take-home pay. This trend could have also played a role in the recovery in take-home pay recently observed in BankservAfrica data.
The average household budget in South Africa has been under immense pressure in the last 18 to 24 months with escalating inflation and a sharp upward trend in interest rates, coinciding with nominal wage increases not keeping up with average inflation.
While the consumer inflation rate has moderated – soon to be around the mid-point of the South African Reserve Bank’s 3% to 6% target band in Q4 and on average in 2025 – and positive trends have emerged on wages, interest rates are still at a 15-year high. It is hoped that the SARB will cut interest rates at the Monetary Policy Committee meeting in September.
“Two 25bps cuts in interest rates are possible by year-end and could somewhat alleviate the pressure on households with credit exposure while stimulating retail expenditure,” says Kruger.
The BankservAfrica Private Pensions Index (BPPI), which tracks the pension payments to about 700 000 private pensioners, improved in June 2024.
“The average nominal private pension increased to R11 233 in June 2024 compared to the previous month’s R10 697 – 4,6% higher than a year earlier – and the first time above R11 000 since October 2023,” says Naidoo.
In real terms, the average BankservAfrica BPPI for June 2024 increased on a monthly basis, but remained 0,6% below a year earlier.
The pension industry is currently in sharp focus given that the Two-Pot Retirement System has been signed into law and will be implemented on 1 September 2024. The new dispensation will likely create a greater awareness among members about their retirement savings, which is welcomed and helpful.