Bad news about salaries in South Africa

The declining trend in South Africans’ real incomes relative to inflation means South Africans are getting poorer.

Investec chief economist Annabel Bishop said average salary increases slowed in October 2023 to 1.8% year-on-year from 4.1% in September. It is below the inflation rate. 

In real terms, October 2023 saw a 3.4% drop in real take-home pay, according to BankservAfrica data. The average real salary fell to R13,942 per month in October, down from R14,226 in September.

It is much lower than R16,124 in February 2021, which weakens household consumption expenditure growth and, therefore, GDP growth.

CPI inflation rose in October to 5.9% year-on-year, from 5.4% in September and 4.8% in August. Inflation cuts cut into real incomes – and, therefore, real expenditure – as nominal take-home pay increases did not rise by the same amount.

Therefore, average salaries in nominal terms rose by only 4.1% in September. It was below the 5.2% inflation rate and dropped by 0.8% in real terms in September and by 3.4% in October.

Source: Investec, Annabel Bishop

The Q4 2023 Bureau for Economic Research Retail Survey shows that “durable goods and non-durable goods retailers, in fact, reported lower sales volumes compared to the previous festive season”.

Bishop explained that this indicates consumer financial strain in a higher interest rate environment.

She said high inflationary pressures in South Africa have come from the supply side, mainly fuel and food costs. South Africa’s CPI inflation rate has been “uneven in its descent, but the trend is still one overall of falling inflation”.

“Indeed, higher operating costs for businesses, including self-generation of electricity in the case of load-shedding, have weighed on businesses,” Bishop said. 

The BankservAfrica Economic Transactions Index showed a contraction of 2.3% quarter-on-quarter in Q3 2023.

In addition, the ABSA Purchasing Manager Index rose to 48.2 in Q4 2023 from 47.8 in Q3, although both indicate contractions in the industry hurting GDP.

Bishop said that while a technical recession is possible for Q4 2023, any contraction, if it occurs, should be less than Q3 2023’s 0.2% decline in GDP.

Source: Investec, Annabel Bishop


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