<strong>Average take-home pay down again in January</strong>

Challenging economy continues to take a toll on salary payments

According to the BankservAfrica Take-home Pay Index (BTPI), the average nominal take-home pay fell again in January 2023 as the adverse economic situation persisted, impacting enterprises working under high-pressure conditions caused by continuing power shedding and growing prices.

“The average nominal take-home pay for January was R14 305, which was 7.5% lower than the R15 467 recorded in January 2022,” says Shergeran Naidoo, BankservAfrica’s Head of Stakeholder Engagements. “On a monthly basis, January’s nominal average take-home pay was also somewhat lower than the R14 684 in December.” 

Constant load shedding, high production costs owing to high fuel prices and rising wage demands, as well as raised interest rates and declining demand, are all factors contributing to enterprises’ bleak growth prospects. With many resorting to shifting funds set aside for investment towards self-sufficiency and becoming less reliant on Eskom, employment growth and wage increases are expected to suffer.

Consumer inflation has been moderating slowly, resulting in the ongoing erosion of the purchasing power of households, according to independent economist Elize Kruger. Reaching a 13-year high of 6.9% in 2022, consumer inflation is forecasted to average at around 5.7% in 2023.

“Confirming this trend, BankservAfrica’s data indicated a notable 13.7% y/y decline in the average real take-home salary in January 2023, compared to a year earlier. This trend has subsequently filtered through to lacklustre household consumption expenditure,” comments Kruger. StatsSA data recently indicated that real retail sales only increased by 1.7% in 2022 compared to 6.3% in 2022.

While employment levels increased notably in 2022, though still catching up to the job losses incurred during the Covid-19 pandemic, January 2023 showed the opposite.  “Adjusted for weekly payments, BankservAfrica’s data suggests that 606 500 less salaries were paid into South Africans’ bank accounts in January 2023 compared to the previous month.  Sixty per cent of these job losses occurred in salary categories for people earning less than R5000 per month, confirming that it is most likely a reversal of temporary jobs created for the annual festive season in December,” says Kruger.

In nominal terms, the BankservAfrica Private Pensions Index (BPPI) remained unchanged from December.

“The average pension paid was R10 021 in January, which was 6.9% higher than one year earlier, and slightly above the monthly average in 2022, which was R9 982,” notes Naidoo. 

In January 2023, the value of total take-home pay and private pension payments (less than R100,000 per month) handled by BankservAfrica grew by 7.9% in real terms and 15.3% in nominal terms compared to the previous year, not seasonally adjusted.

“With little indication of a notably different economic environment in 2023, the job market is likely to remain strained, as the main economic challenges prevail,” says Kruger. On the positive side, last week’s 2023 National Budget, presented by Finance Minister Enoch Godongwana on 22 February, included no changes to major tax rates or the fuel levy, while the Minister provided relief for ‘bracket creep’, where an employee pays higher tax following an inflation-related pay boost, finishing worse off after-tax. The state spent R15.7 billion to provide tax relief by revising personal income tax bands and refunds for the effect of inflation, resulting in a significant benefit to taxpayers. Additionally, through an extension of the renewable energy incentive, R4 billion in relief is granted to homes that install solar panels and R5 billion to businesses. Nonetheless, these policies are unlikely to have a significant impact on economic development prospects in 2023, but rather in the medium term.