SAs getting poorer as higher inflation affects salaries

South Africans are getting poorer as higher inflation affect their salaries. Take-home pay for March was lower and employers expect to award wage increases of 4% to 6% in the next 12 months, which is substantially below the current 7% inflation rate.

This means that employees will have less disposable income and it will place pressure on companies to find new ways to keep staff engaged and retain critical skills.

The unexpected headline inflation increase in March was one of the reasons that take-home pay slipped marginally according to the latest BankservAfrica Take-home Pay Index (BPTI).

In addition, the index showed a new trend is emerging as more companies operate under the challenging economic environment of persisting load shedding and higher costs.

The index data suggests more volatility in lower income categories with companies opting for more contract or casual workers instead of permanent positions.

The average nominal take-home pay in March declined on a monthly basis to R15 321, although this was still 1.8% higher than the R15 046 recorded a year earlier.

“Salaries measured in the BTPI have been disappointing over the last 12 months. Consumer inflation reached a 13-year high of 6.9% in 2022, resulting in a notable erosion of the purchasing power of households,” says Shergeran Naidoo, BankservAfrica’s head of stakeholder engagements.

The recent depreciation in the Rand exchange rate and additional cost of production due to load shedding and related extra expenditure clearly added an additional layer of costs to the economy, he says.

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Salaries will remain lacklustre

Independent economist, Elize Kruger, says with inflation remaining elevated for longer than hoped for and little indication of a notably different economic environment in 2023, salary adjustments and the job market will likely remain lacklustre this year.

BankservAfrica’s data suggests some jobs were created in February and the data for March confirms the hesitant recovery with about 216 000 more salaries paid.

The local job market is still recovering from the heavy job losses incurred during the Covid-19 pandemic, which remains a challenge amid the low growth reality in South Africa.

According to the March 2023 Quarterly Labour Force Survey, total employment stood at 15.9 million at the end of 2022, compared to the pre-Covid level of 16.4 million in Q4 2019.

“The average take-home pay has also moved mostly sideways since 2021, indicative of low to unchanged salary adjustments in the current ‘survival’ economy,” Kruger says.

Inflation also affected private pensions according to the BankservAfrica Private Pensions Index (BPPI).

“On a monthly basis, the nominal average private pension slipped marginally to R10 036, 6.7% higher than a year earlier and slightly above the monthly average in 2022, which was realised at R9 987,” Naidoo says.

The average real private pension in March 2023 came to R9 414, just marginally lower compared to a year earlier, signalling that the purchasing power of pensioners has been largely preserved amid the high inflation environment.

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Employees taking financial strain

The bi-annual Salary and Wage Movement Survey Report also shows employees are taking financial strain and are getting poorer as wage increases lag behind inflation.

The report indicates that employers expect to award wage increases of 4% to 6% in the next 12-month period, substantially below the current 7% inflation rate.

The report is based on data submitted by 65 organisations and the internet-based survey sample represents a broad cross-section of companies spanning a wide range of economic sectors, with 64.6% of the sample represented by unlisted companies, 27.7% from listed companies and 7.7% from quasi-government or government sectors.

An analysis of the employee categories under review includes executive, management, general staff and unionised staff, totalling 343 097.

According to René Richter, managing director of Remchannel, says the economic climate continued its downward trajectory, with the GDP contraction expected to be 0.4% for the first quarter of this year.

“This situation has been characterised by sustained load shedding, significantly impacting the economy. Increased downtime and costs associated with alternative energy supply have escalated production costs and adversely affected revenues and profitability.”

She says South African households are invariably under pressure with the vast majority of “blue collar” employees becoming poorer.

If households want to climb out of this rut and gain more wealth, their income must increase at least by more than the consumer price inflation (CPI) rate.

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Employers tightening belts affect salary increases

“Organisations inevitably tightened their belts to curb costs, which has impacted the salary increases granted to employees being substantially below inflation. At the same time, talent and specialist skills are scarce and previously disadvantaged individual (PDI) categories attract a premium.” 

Richter believes that while there has been less hype about the great resignation now that the pandemic is considered over, it is definitely not disappearing.

The survey shows that organisations lose much experience and accumulated knowledge when employees leave.

“Labour turnover averaged 16.6% and one of the salient survey findings is that labour turnover due to resignations was 41.22%. In South Africa, the ‘great resignation’ is ring-fenced in the professional and specialist roles of scarce skills in the market.” 

Richter says this untenable situation will force employers to reconsider their employee value proposition and retention policies to retain their brightest staff. Some of the reasons for resignation include:

• 44% of employees resigned due to better career prospects, higher remuneration and improved employment conditions.
• 20% experienced burnout and stress or are changing careers or emigrating.
• 9% experienced a toxic workplace.