Good news about salaries in South Africa

In January 2025, the average take-home pay in South Africa increased to R18,098, an increase from R15,670 in January 2024. This translates to R2,534 extra every month.

BankservAfrica’s Take-home Pay Index (BTPI), which tracks the average nominal take-home pay of an estimated 4 million salary earners in South Africa, revealed that this year started on a strong note.

“The average take-home pay rose to R18,098 in January 2025, compared to R17,246 in December 2024 and R15,564 one year earlier,” said Shergeran Naidoo, BankservAfrica’s Head of Stakeholder Engagements.

Independent economist Elize Kruger said this positive remuneration trend evident in the BankservAfrica sample reflects a generally improved business environment.

There has also been a notable moderation in inflation, higher confidence levels in the economy, and three interest rate cuts that have provided much-needed relief.

Kruger explained on the Kaya Biz podcast that South Africa faced a challenging economic environment in 2022 and 2023 due to load-shedding, high inflation, and high interest rates.

During this period, nominal wage increases did not keep up with inflation, meaning South Africans had decreasing purchasing power.

“In 2024, we started to see that change, but it’s almost as if there’s some catch-up needed to happen to get households to the point where they do feel more purchasing power in their pockets.”

Kruger explained that real salary increases, which consider the increasing cost of living, have increased significantly compared to a year ago.

In real terms, take-home pay also increased to R15,659 in January 2025, a notable 12.8% up on year-ago levels, and reached its highest level since February 2022.

This was driven by the significant moderation in consumer inflation during 2025, from 5.3% in January to 3.0% in December, which has positively impacted the purchasing power of salary earners.

Additionally, the headline CPI averaged 4.4% in 2024, the lowest annual rate since 2020.

“As such, the real take-home pay averaging at R1,292, up by 3.1% in 2024, represented the first real increase in take-home pay since 2020,” Kruger said.

“In real terms, we’re now back where we were at the beginning of 2022,” Kruger explained. “So we’ve had a couple of those dismal years where we were behind in the inflation environment, and now we’ve started to move above.”

“But because of the fact that you’ve had that period that you were struggling with your purchasing power being eroded by high inflation numbers, it doesn’t feel like that.”

In 2024, company profitability improved, enabling companies to pay their employees better salaries. This is reflected in the above inflation increase in the gross operating surplus of companies.

The improving environment was also echoed in the sizeable total return on the FTSE/JSE All Share Index in 2024 (+13.4%), reflecting the promising earnings potential of listed companies.

If inflation remains well-contained in 2025, with the average headline CPI forecasted to be at 4.2%, 2025 could be the second consecutive year of positive real take-home pay growth.

BankservAfrica explained that the economic outlook indicates that the salary gains seen in 2024 could continue to strengthen in 2025.

On the economic front, real GDP growth is forecasted to increase by 1.7% in 2025, somewhat higher than in 2024.

A combination of improved household consumption expenditures, higher fixed investment spending, and further advances in structural reforms will accelerate growth.

An ongoing focus on improving South Africa’s electricity generation capacity, addressing supply chain blockages relating to freight rail and port operations, and upgrading water infrastructure, among others, are much-needed actions to propel the economy forward.

“The anticipated improvement in the business environment is expected to enable companies to offer more substantial salary increases in 2025, which in combination with a moderate inflation environment, could mean a second consecutive year of a real increase in take-home pay,” Kruger said.

However, if the 2025 National Budget had been tabled with the 2% VAT increase, it would have derailed the positive inflation outlook somewhat, eroding the fragile recovery in the purchasing power of salary earners.

“While we await the revised budget on 12 March, the postponement has introduced uncertainty, raising concerns about its potential impact on the economy’s recovery prospects,” Kruger added.