South African salaries declined slightly – but good news expected

The average take-home pay, measured in the BankservAfrica Take-home Pay Index (BTPI), fell marginally in March.

The decline was caused by market and economic factors that have placed financial constraints on companies and pressure on salaries.

The weak level of the rand exchange rate and higher fuel prices, among other factors, contributed to the strain on the economy during March.

The average real take-home pay, adjusted for inflation, tracked lower at R14,236 in March. It was a slight decline from a year ago.

In nominal terms, the average salary moderated slightly to reach R16,043, still 5.0% up on a year-ago and 3.6% up on December’s R15,484.

A comparison of the average nominal BTPI in Q1 2024 to the corresponding quarter one year earlier showed a 6.2% increase.

If this continues, 2024 could be a better year for salaries as the business environment is expected to improve.

This is in comparison to the previous two years, when companies struggled to pay inflation-related increases due to the ongoing economic challenges.

Although mediocre economic growth of 1.1% is forecast for 2024, it is somewhat better than 0.6% in 2023.

The improved outlook hinges on the assumption of reduced load-shedding, a moderation in average inflation, and a start to the interest rate-cutting cycle.

Year to date, BankservAfrica data signals alignment with the South African Reserve Bank’s (SARB) forecast of an average salary increase of 6.1% for 2024.

A recent trend that has been developing, especially in the mining industry, where companies enter into above-inflation, longer-term wage agreements.

With the average headline CPI forecast to moderate to 5.3% in 2024 and 4.8% in 2025, workers locked into these agreements will receive considerable real increases.

“Inflation has turned out to be quite sticky on the downward path, locally and globally, driven by higher services and administered price inflation,” said economist Elize Kruger.

Headline inflation moderated notably from 7.1% in March 2023 to 5.3% one year later but is forecast to remain around the 5.3% – 5.5% level until September and below 5% by year-end.

“Positive real increases in average salaries in 2024 would be a welcomed development as workers’ purchasing power will improve compared to the previous two years,” said Kruger.

“Lower interest rates could improve financially stressed households’ spending ability and confidence levels. However, this may only happen in the second half of the year.”

Nominal vs real BankservAfrica Take-home Pay Index – quarterly average comparison