A welcomed recovery in both nominal and real take-home pay in July, while average pensions rose further

A notable uptick in July has brought the average nominal take-home pay, as tracked in the BankservAfrica Take-home Pay Index (BTPI), to R15 503 (R14 509 in July 2022) and notably higher than in June (R14 619).

After having stabilised in Q2, salaries increased in July despite the economic narrative that has largely remained unchanged.  Many challenges remain with economic activity still dampened by the ongoing load-shedding (though some moderation is evident in stages that apply), elevated interest rates, a lacklustre job market and low confidence levels. Indications that some industries have become progressively more resilient to the effects of load-shedding, as companies reduce their energy dependence on the embattled Eskom, has been an underlying positive development in recent months.

Compared to a year ago, the average real take-home pay lifted out of a prolonged slump, growing by 1.2% year-on-year, and showing the first positive annual growth rate since September 2021. In real terms, the BTPI increased to R14 344 in July 2023, 6.1% higher than in June 2023 (R13 514) and marginally higher than July 2022’s R14 168. While this is the first glimmer of hope in a while, it has to a large extent been driven by a notable moderation in consumer inflation, which might not be a sustainable trend as renewed pressure on fuel prices have reared its ugly head again, while the recent depreciation of the rand exchange rate will also add to the cost of imported products, pushing inflation higher.

Consumer inflation moderated from 7.1% y/y in March to 5.4% y/y in June, the first print back in the South African Reserve Bank’s 3-6% target band since April 2022. The moderation in consumer inflation will go some way in reducing the extent of the erosion of purchasing power that households have had to deal with, especially in the past year, however, the relief might prove short-lived. Forecasts suggest that headline inflation could be around 5.0% y/y in July, but sizeable fuel price increases are now on the cards for early September (petrol around R1.70/l and diesel around R2.80/l) that could push headline inflation again towards 6%. Consumer inflation is currently forecast to average around 6.1% in 2023 (previously 6%) compared to a 13-year high of 6.9% in 2022 (2009: 7.1%). While the interest rate cycle should be close to a plateau, the South African Reserve Bank will in all probability be uncomfortable with the renewed rand depreciation and upward pressure on transport inflation – and could potentially pull the trigger again on interest rates (the next MPC meeting is scheduled towards end-September). With household finances already under severe pressure, that would be very negative for the spending ability of consumers. Already DebtBusters’ recently released annual Money Stress Tracker, one of the largest surveys about how financial stress affects other aspects of South Africans’ lives, found respondents who said they were stressed about money had increased from 70% in 2022 to 78% this year.

BankservAfrica’s data – adjusted for weekly payments – suggests the job market remains uninspiring, moving mostly sideways – see graph 2. While less salaries were paid into the bank accounts of South Africans in Q2 (according to the BankservAfrica sample), just more than 63K more salaries were paid in July, but not nearly enough to offset the previous few month’s losses. With little indication that the second half of 2023 will be significantly different to the realities of the first half, the job market is likely to remain lacklustre in the remainder of 2023.   

Average private pensions increased further in July

The BankservAfrica Private Pensions Index (BPPI) ticked up further in both nominal and real terms during July, continuing its solid performance. The BankservAfrica Private Pensions Index (BPPI) 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.  In real terms, the average real private pension in July 2023 came to R9 971, 2.3% higher compared to a year earlier, signalling that the purchasing power of pensioners has largely been preserved amid the high inflation environment – see graph 3. The average nominal pension payment represents 70.6% of the average take-home pay in July 2023. The value of total take-home pay and private pension payments (less than R100K per month) processed by BankservAfrica in July 2023 declined by 4.3% in real terms, and increased by a mere 0.5% in nominal terms, compared to a year earlier, on a non-seasonally adjusted and smoothed basis.

Table 1: The BankservAfrica Take-home Pay and Private Pensions indices

Source: BankservAfrica