More money in South Africans’ pockets in 2024 

South Africans have more money in their pockets now than they did at the end of 2024, as the average take-home pay has reached its highest level on record, interest rates are coming down, and petrol prices are lower than six months ago. 

Earlier this year, South African households were under immense financial pressure and were beginning to take on debt to maintain their lifestyles or buy basic necessities. 

Prices of universal products and services, such as food, electricity, and fuel, rose sharply throughout 2023. 

In 2023, food inflation averaged 10.8%, following an average of 9.2% in 2022 – driving up headline inflation. 

The increases in the price of food have been compounded by electricity tariff hikes, which are 12.7% higher than last year. 

Increased fuel prices have also affected consumers, rising 17.1% in 2022 and 5.1% in 2023. As fuel is a universal input, this effectively raises the cost base of the entire economy. 

This was coupled with elevated interest rates, which have remained near 15-year highs throughout 2024. 

The Reserve Bank has raised interest rates by 475 basis points since November 2021, taking the prime lending rate to 11.75% until September 2024.

This significantly increased the cost of car and home loans. For example, repayments on a R1.5 million home loan increased by R4,600 per month at the peak of the interest rate hiking cycle compared to three years ago. 

The pressure from these factors began to affect South African consumers, with many having little to no money left over at the end of the month to save. 

Standard Bank analysed data from over 402,000 individuals who receive their salaries on popular payment dates, including mid-month, the 25th, and month-end. 

The day before payday, 21% had R1,000 or less, while 28% had negative balances or were using overdrafts. Only half had more than R1,000 in their accounts.

Richer South Africans have not been spared, with emerging middle-income earners being the highest percentage of customers with less than R1,000 or in the red. 

Private banking customers aren’t exempt either, with one in ten customers having a negative balance before payday.

Relief is here

The Reserve Bank entered its interest rate cutting cycle in September, reducing the repo rate by 25 basis points. 

As inflation continues to moderate, the bank is well set to continue cutting rates. The consensus among economists is that rates will come down by a cumulative 100 basis points by the middle of 2025. 

While the cutting cycle may appear slow and shallow, even small interest rate cuts free up billions of rands for South African households and consumers. 

Standard Bank calculated that a 25 basis point cut would reduce the repayments by R208 per month or R2,500 per year for a home loan worth R1 million. 

Overall, after a 100 basis points reduction in interest rates, homeowners will pay R832 less per month on their mortgages. 

South Africa’s home loan market is estimated to be worth around R1.2 trillion. This means a 50 basis point cut will free up R4 billion currently going towards repayments. 

An entire percentage point cut, as forecasted by Standard Bank, will save homeowners around R8 billion in repayments. 

Billions more will be freed up by a reduction in car repayments. Combined, this will result in substantial savings for South Africans and boost the local economy through increased consumer spending. 

South Africans also have extra money in their pockets from the declining price of fuel in South Africa. Since May, the price of 95 octane petrol has come down by R4.19 per litre. 

The price of 93 octane petrol has declined by R4.17 in the same period and the price of both grades of diesel has come down by over R3 per litre since May.

Despite fuel prices ticking upwards slightly in November, the downward trend is largely set to continue as oil supply picks up and remains undisrupted while the rand holds its own against the dollar. 

These reductions in the cost of living for South Africans have come at a time when the average take-home pay has reached its highest level on record. 

BankservAfrica’s latest report on take-home pay in South Africa showed that the average salary rose above the R17,000 per month mark –  the highest level since the inception of the BankservAfrica Take-home Pay Index. 

BankservAfrica also noted that declining consumer inflation would likely benefit salary earners and boost their purchasing power. 

Real take-home pay has risen by 2.2% in the first nine months of 2024 compared to the full-year average in 2023. In nominal terms, this has climbed by 6.3%.