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SA's average real take-home pay increase highest in 15 months

Jul 26 2017 18:56
Carin Smith

Cape Town - Seasonally adjusted real take home pay of South Africans averaged R13 894 in June 2017, slightly higher than May’s average of R13 802, according to the latest BankservAfrica Economic Transaction Index (BETI) released on Wednesday.

South Africans’ real take-home pay increased by 1.3% in June - the highest increase in 15 months.  This was the fourth consecutive month it increased.

The BankservAfrica Disposable Salary Index (BDSI) indicates slower inflation increases and faster nominal wage growth have helped formal sector wage earners gain higher real increases.

READ: Negative impact of downgrades starting to show - index

As such, South African formal sector workers paid via the South African payments system are better off than a year ago.
 
With most of the last two years showing declines in real take home pay, as seen in the BDSI, the last four months point to a strong likelihood of a change in the downward trend as inflation falls and salaries are adjusted accordingly, the report states.

Formal sector real salary increases are recording improved increases on average as they are based on past inflation rates.

Real median
 
According to the BETI report, the median or typical disposable salary increased in real terms in June, and for five consecutive months. The real increase of 3.4% in June is the highest for median salaries in 30 months.

Despite personal income tax brackets not being fully adjusted for inflation for the last decade and medical insurance payments increases being about 3% higher than inflation, the number of employees taking home over R10 000 per month in nominal terms has increased from 33.8% in January 2012 to 52.6%.

It, therefore, appears that take-home pay is increasing faster for lower salary levels.

"While consumer confidence is at very low levels in the economy, real salaries for the majority of the formal sector employees have increased, even when taking inflation into account. Over the past year, salaries negatively impacted consumer confidence as salaries failed to increase and match inflation levels," according to the report.

"In the past five months, this negative trend reversed and wages grew at real prices again. This should improve the country’s consumer confidence indicators and the rise in real retail sales again."

Nominal price terms

In nominal price terms the average disposable salary – paid via the BankservAfrica payment system - increased by 6.7%. This was slightly higher than the 6.6% increase that May 2017 recorded over May 2016.

The BDSI movement for real salaries indicates that the trend of shrinking real salaries has changed. This is due to last year’s higher consumer price inflation, which plays a large role in determining the size of the current increases given by larger employers such as the civil service, according to the report.

Better situation

Economist Mike Schüssler told Fin24 that disposable salary increases in nominal terms have not changed that much, but in real terms they are starting to change as inflation is coming down. So that is putting people in a better situation than they would have been.

In his view, that is one of the reasons for better retail sales - a trend he thinks will continue. At the same time he does not think this shift was enough yet to get consumers to spend on big ticket items like cars, televisions and property again.

READ: Volatile SA economy actually running on one spot - report

"The volume of property transfers is still under two thirds of the high point in 2007 and still below the average," said Schüssler.

"The ratio of household debt to disposable income is now the lowest level in 11 years, which is a good thing, but at the same time consumers have become a little bit more wary of taking on debt - despite interest rate moves either way."

Recovery mode

He thinks that overall South Africans had a very hard time and they are still maybe a little bit in a recovery mode.

"Last year we had decreases in real take home pay and at least now the tide has turned for the last few months. And as they recover, they will look at increasing their spending budget again," said Schüssler.

"Retail spend is not going to go through the roof right now and people will still be looking for big bargains like on clothes. I think general retailers will start doing better and clothing will probably follow in a few months. It is a process."

He said people still have a bit more money in their pockets due to petrol price decreases since the beginning of the year and many have now already received their annual salary increases.

"People have realised in harder times that they can live with less, so it will take time for them to start spending on big ticket items again. Someone might, for instance, buy a kettle now, but not yet a new lounge suite," said Schüssler.

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bankserv­africa  |  salaries  |  beti  |  sa economy
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