No inflation-related salary increases over past two years
Consumers are spending less, not only because everything has become so expensive, but because their salary increases are not keeping up.
Ongoing economic challenges hampered companies’ ability to pay inflation-related salary increases over the past two tears. These challenges included significant increases in the operating cost environment partly due to the impact of load shedding, as well as global factors that took a toll on companies’ profits.
However, the BankservAfrica Take-home Pay Index (BTPI) which tracks the average nominal take-home pay of approximately 4 million salary earners in South Africa, ended the 2023 year on a slightly better note, as salaries and private pensions performed slightly better than in the year before.
“The average nominal take-home pay was 5.6% higher at R15 409 in December 2023 compared to the R14 596 recorded in December 2022,” Shergeran Naidoo, BankservAfrica’s head of stakeholder engagements, says.
But the average nominal take-home pay in 2023 was only slightly better than the averages noted in 2022 and 2021, suggesting a sideways movement over the past three years. With inflation on the rise during this period, salary earners were worse off in real terms for the third consecutive year, he says.
People earns less, so they spend less
“This pressure on disposable income is evident in the dwindling retail sales growth, with real growth for the eleven months to November 2023 at 1.5% lower than the previous year, while passenger car sales also contracted in 2023,” says Elize Kruger, an independent economist.
After declining for three consecutive months, annual growth in the average real take-home pay was flat in December 2023. The real take-home pay at R13 732 in December 2023 was slightly higher than in November, but for the year, average real take-home pay dropped by 4.7% compared to 2022, suggesting significant ongoing erosion in the purchasing power of salary earners, she says.
“With international oil prices and the rand exchange rate expected to be stable on an annual average basis in 2024 and food price inflation forecast to moderate further, consumer inflation is expected to average about 5.2% compared to 6.0% in 2023.”
Possibility of lower inflation and interest rates
Kruger says lower inflation with a possibility of lower interest rates later in the year could provide much-needed support to households regarding spending ability and confidence levels this year.
Statistics SA’s latest Labour Force Survey confirmed the indications from BankservAfrica’s sample, which represents about 25% of the broad labour market. According to the survey 399 000 jobs were created in the third quarter of 2023, while the official unemployment rate moderated to 31.9%, down from 32.9% a year earlier.
Adjusted for weekly payments, BankservAfrica’s sample signals that 430 000 more salaries were paid in the fourth quarter which should see the unemployment rate moderating further, Kruger says.
The BankservAfrica Private Pensions Index (BPPI) slipped marginally in nominal and real terms in the last five months of 2023, but remained in positive territory on an annual basis.
“The average nominal private pension fell slightly to R10 606 in December, compared to the previous month’s R10 647 but it is still a healthy 5.7% higher than a year earlier,” Naidoo says.
Private pensions beat inflation levels
In 2023, the average private pension of R10 657 was 6.8% higher on a year-on-year basis, signalling that the purchasing power of pensioners represented in the BankservAfrica database had endured even in the high inflation environment. The average BPPI increased 0.8% in real terms in 2023, beating inflation levels.
The value of total take-home pay payments processed by BankservAfrica increased 6.0% in December 2023 nominal and real terms and private pension payments by 0.8% compared to a year earlier on a non-seasonally adjusted and smoothed basis.