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Disposable salaries, pensions bounce back strongly

Cape Town - In March real take-home pay increased above the rate of inflation for the first time in 10 months, according to the latest BankservAfrica Disposable Salary Index (BDSI).

The average disposable salary of R14 098 in real terms is, however, still some way off from its high in September 2015 where it stood at  R14 172.

As such, consumers are likely to still feel somewhat restrained in their spending, according to the BDSI report, and further pressure is likely from the recent sovereign credit rating downgrade, which may affect consumer debt confidence levels. Consumers may, therefore, hold onto the money with the concern that the increased risk will impact them down the line.  

READ: Average real disposable salaries continue to decline - index

The BDSI also showed that March’s take-home pay increase after inflation was the strongest in 18 months with an improvement of 1.3% on a year-on-year (y/y) basis.

The change in March from the 0.8% decline in February is a very strong indication of the positive growth in take-home salaries, according to the BDSI report.

Last month’s data is also a marked improvement from January which experienced a real year-on-year decline of 2.6%. This means that the real bounce over the last three months is nearly 4%. According to the report, this is a very positive data trend for employee and consumer spend in the economy.

Number of factors

March’s improvement can be owed to a number of factors including the lower rate of inflation, higher gross salary increases based on last year’s higher inflation and the low y/y base in March 2016, according to the report.

There also seems to be a movement of employees out of the lowest payment level. Those receiving less than R4 000 per month in their bank accounts have averaged just 13.9% of the total amount over the last six months.

According to the report, this may have to do with fewer garnishee orders following the recent successful court case against debt collectors who were found to be abusing these orders.

Additionally, it may also be due to debt collected at firm level and before the payment of salaries into bank accounts being on the decline.

READ: Inflation eats away at salaries for 7th straight month

Against these factors are the increased personal income taxes and the many employees who are still not getting salary increases in line with inflation, the report states.

It foresees that, should this take-home salary trend continue over time, improved retail sales and general consumer expenditure can be expected.

"The March BDSI data is at least evidence of a green shoot in the SA economy. The dramatic events from the last month may, however, have a different outcome in the BDSI in the months to come," cautioned the report.

Private pensions also improve

The BDSI shows that bankable pensions have resumed their upward trend, increasing by 2.8% in real terms to R6 575 per month on average in March 2017. This is the strongest showing since August 2016 in percentage increase terms.

While it is difficult to explain the reason for the increases in private pensions, this may in part be due to pensioners drawing down their pension quicker as there is not much evidence of equity market nor foreign investment growth in rand terms, according to the BDSI report.
 
It said higher interest rates may be playing a small positive role in the increase in private pensions, but even this would not be enough to help increase nominal private pensions having increased by 9.1%.

As BankservAfrica has about 80% of all the estimated private pensioners going via their payment system, a steady 4.7% increase in the number of private pensioners was observed. This is the highest increase in the number of private pensioners.
 
New pensioners are also likely to enter the system with a higher pension as those with defined benefits would have higher salaries than their predecessors and the increase in the number of employees saving for pensions over the last few decades would make for higher payments – at least initially.

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