Challenging economy continues to take a toll on salary payments

Johannesburg - The average nominal take-home pay slipped again in January 2023, according to the BankservAfrica Take-home Pay Index (BTPI) as the challenging economic environment continues, affecting companies operating under high- pressure conditions brought on by the ongoing load shedding and rising costs. 

“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.”

The constant load shedding, high production costs due to high fuel prices and rising wage demands as well as elevated interest rates and moderating demand are all contributing to the dismal growth prospects faced by companies. With many resorting to redirecting their capital earmarked for investment towards self-sufficiency  and becoming less dependent on Eskom, employment growth and salary increases are likely to be impacted.

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.

The BankservAfrica Private Pensions Index (BPPI) in nominal term remained flat compared to 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.

The value of total take-home pay and private pension payments (less than R100K per month) processed by BankservAfrica in January 2023 increased by 7.9% in real terms, and by 15.3% in nominal terms, compared to a year earlier, 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 salary increase, ending worse off after-tax.

Granting tax relief by adjusting personal income tax brackets and rebates for the effect of inflation cost the state a notable R15.7 billion, a sizeable benefit to taxpayers. Furthermore, R4 billion in relief is provided for households that install solar panels and R5 billion to companies through an expansion of the renewable energy incentive. However, these measures are unlikely to make a material difference to the economic growth prospects for 2023, but rather in the medium term.