Why South Africans feel poorer than they really are

Cape Town - The fact that the average disposable salary is still below the average take-home pay levels of the end of 2015 and beginning of 2016 is the biggest reason why people feel “poorer”, according to the BankservAfrica Disposable Salary Index (BDSI) for July, which was released on Wednesday.   

"The average salaries have not yet caught up to the highs of 18 months ago. Therefore, many employees are feeling less well off," explains the index report.

Average disposable salaries are increasing in both nominal terms and real terms, as reflected in BankservAfrica’s Disposable Salary Index (BDSI) for July.

In real terms, salaries increased by 2.5% in July - the fastest increase since August 2015.
 
For the fifth consecutive month in a row, average disposable salaries increased faster than the rate of inflation.
 
While this is partly due to the decrease in the inflation rate, salaries have also increased in nominal terms at a fast rate of 7.6%. This is the same as March 2017 - and the highest since December 2014.

Salary raises are increasing and this is reflected in consumer spending with retail sales recovering. Car sales are also no longer on the decline.

READ: Inflation eating into SA's disposable salaries

Average salaries can be deceptive
 
The average salary can be deceptive as some may have had large increases, while others may have had no increase at all. This, however, does not seem to be the case as seen in the median salary, which measures a person’s typical salary.
 
The median disposable salary increased by 4.2%, indicating the majority of increases were in the middle and lower end of the salary distribution.

This increase is the highest since July 2013.

The median salary is now 75.9% of the average salary in disposable terms. This is up from 72.7% in July 2012.
 
The above indicates that typical employees in the formal sector are certainly getting higher salary increases than in the last few years. It is also likely that garnishee orders are starting to become less of an influence on the salary structure in the formal sector.
 
The real median salary is at an all-time high at R10 680 per month while the average salary is still below the high in real terms of October 2015.

READ: Negative impact of downgrades starting to show - index

Pensions

The BankservAfrica Private Pension Index (BPPI) indicates that pensioners had a smaller increase than average disposable salaries for the first time since December 2015.

Pensions paid into bank accounts in SA have, however, again increased above the rate of inflation over the last year with 2.4% on average.

The median pension also beat inflation but with a lower 1.4%, suggesting that those with smaller pensions are not seeing much of an increase in their pension payments.

The average real pension paid into a bank account was R6 584, while the typical (median) pension was R4 547. The median pension was only 69.1% of the average pension.

Now in its fifth year of running and covering over 70% of pension payments, the BPPI provides a good overview of South African pensioners and their retirement savings. This is the first and only pension pay-out indicator that is available on a monthly basis in the world today.

Consumer recovery

The increases in both the BPPI and BDSI will help consumer recovery in SA, according to the BankservAfrica report on the two indices. While consumer spending dropped in the first quarter of 2017 as a result of a decline in real salaries and pensions, the upturn in both pensions and salaries in real terms indicates a stronger consumer with greater spending power in the coming quarters.

"This will help the SA economy to grow. The country’s gross domestic product growth is already ticking up - albeit not at the pace one would hope for," the report concludes.

SUBSCRIBE FOR FREE UPDATE: Get Fin24's top morning business news and opinions in your inbox.

Read Fin24's top stories trending on Twitter: Fin24’s top stories