South African average salaries improved by 2.5% in February with the monthly, annual and quarterly increases suggesting a better year for take-home pay.
The monthly BankservAfrica Take-home Pay Index (BTPI) experienced another positive month in February amid the better-performing environment, resulting in companies increasing their employees’ average salaries over the past three months.
Shergeran Naidoo, BankservAfrica’s head of stakeholder engagements, said the average nominal take-home pay reached R16 085, which was 4.6% growth on a year ago and also 2.5% up on January’s R15 692.
“In real terms, the monthly take-home pay tracked higher at R14 354 in February 2024, slightly below year-on-year levels.”
This year’s business environment was expected to improve, unlike the previous two years where persisting economic challenges significantly impacted companies and their ability to pay inflation-related increases.
Elize Kruger, an independent economist, said while it was still early days, the BankservAfrica data signalled that this year could be a better year for salaries.
Furthermore, although mediocre economic growth was forecast for this year, the economy was expected to perform somewhat better than the 0.6% reflected last year. This was, however, dependent on reduced load shedding, a moderation in average inflation and interest rate cuts.
A comparison of the average nominal BTPI for the three months to February this year, to the corresponding three months one year earlier, revealed a 6.4% increase, according to Kruger.
This was broadly in line with the forecast of the South African Reserve Bank (SARB) of an average salary increase of 6.1% for 2024. The figure also aligned with the results of a recent pay poll by Andrew Levy & Associates indicating the majority of companies (58%) anticipated their average increase in respect of salaried staff to be in the region of 5% to 6.9%.
Headline consumer price index moderated notably from 6.9% in January last year to 5.3% one year later and was forecast to average around 5.3% this year compared to 6.0% and 6.9% last year and 2022, respectively.
Kruger said with a forecast average salary increase of about 6%, this year could be a year of positive real increases in average salaries again, which would see the purchasing power of salary earners improve somewhat compared to the previous two years.
Additionally, a lower inflation rate combined with some relief forecast for interest rates could provide much- needed support to households in terms of their spending ability and confidence levels. This would likely only be evident in the second half of this year.
The repo rate was likely to remain unchanged at next week’s Monetary Policy Committee meeting as sticky headline inflation, the weakness in the rand exchange rate and concerns on food prices could keep the SARB from providing early relief.
Pensions
The BankservAfrica Private Pensions Index (BPPI) increased in nominal and real terms in February, remaining comfortably above year-ago levels.
Naidoo said the average nominal private pension increased to R10 774 in February this year compared to the previous month’s R10 653, which was 7.1% higher than a year earlier.
Similarly, in real terms, the average BankservAfrica BPPI increased by 1.3% in February this year compared to a year earlier, beating inflation again.
Poverty trap
Meanwhile, new research from the University of Cape Town Liberty Institute of Strategic Marketing showed that in the decade since 2012, there were around 10 million fewer South Africans living in households earning less than R3 500 per month.
At the same time, at the other end of the income spectrum, the number of wealthy households earning more than R75 000 per month had more than doubled since 2012.
According to the research authors, it was the scale of social mobility among the lower earning segments of the population that was the most striking in the research.
Paul Egan from the UCT Liberty Institute of Strategic Marketing said those graduating upwards into the ranks of what's defined as the working poor now constituted 31% of the population, or 18.9 million people.
“They come from the ranks of the officially defined poor, who are bracketed as earning less than R3 500 a month and who now make up 21% of the population, or 17.3 million people," Egan said.
Meanwhile, those earning more than R75 000 a month made up only 2% of the population, or 1.5 million people. Many new entrants to this class come from the middle class who made up 14% of the population.
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