South African households experienced a second month of relief in July, as the average nominal take-home pay increased again.
The average salary performed better in the latest BankservAfrica Take-home Pay Index (BTPI) for July 2023, providing welcomed relief for South African income earners.
“The average nominal take-home pay in July was R15,503, notably higher than the R14,169 in June and R14,509 in July 2022,” said BankservAfrica’s head of stakeholder engagements, Shergeran Naidoo.
Naidoo said these improvements transpired despite the challenges in the South African economy, such as ongoing load-shedding, elevated interest rates, a lacklustre job market and low confidence levels.
It also appears that some industries have become more resilient to the effects of load-shedding and have become an underlying positive in recent months.
The average real take-home pay lifted from its prolonged slump, growing by 1.2% year-on-year to show the first positive growth rate since September 2021.
In real terms, the average BTPI increased to R14,344 in July 2023, 6.1% higher than the R13,514 measured in June.
Independent economist Elize Kruger said this is the first glimmer of hope for salaries driven by the notable moderation in consumer inflation.
However, she warned this may not be a sustainable trend.
“The renewed pressure on fuel prices has surfaced again, and the depreciation of the rand exchange rate will add to the cost of imported products, pushing inflation higher,” said Kruger.
Consumers have benefitted from consumer inflation moderating from 7.1% year-on-year in March to 5.4% year-on-year in June, helping to reduce the erosion of households’ purchasing power.
This, however, may be short-lived. Despite expectations for headline inflation to be around 5% year-on-year in July, the sizeable fuel increases on the cards for September could push headline inflation again towards 6%.
With these developments, the South African Reserve Bank may decide to hike interest rates at the next Monetary Policy Committee meeting in September.
“With household finances already under severe pressure, these changes would be very negative for consumers and their spending power,” said Kruger.
More than 63,000 salaries were paid in July 2023. However, these were not enough to offset the previous month’s losses.
With little indication that the second half of 2023 will be significantly different from the first half, the job market will likely remain lacklustre for the remainder of the year.
The BankservAfrica Private Pensions Index (BPPI) ticked up further in both nominal and real terms during July, continuing its solid performance.
“The nominal average private pension increased to R10,943 in July compared to the previous month’s R10,776, 7.5% higher than one year earlier and the highest monthly payment so far in 2023,” said Naidoo.
“In real terms, the average real private pension in July 2023 came to R9,971, 2.3% higher compared to a year earlier.”
These developments suggest private pensions have held up well despite the rising inflation.