Amid persistently high inflation, any increases South Africans saw in their wages and salaries over the past few years failed to keep up with the pace at which prices were rising, ultimately leaving households worse off.
But after five consecutive months of improvement, take-home pay in SA is now on track to beat inflation for the first time since 2020.
According to BankservAfrica’s take-home pay index for August released on Wednesday, the average nominal take-home pay for 4-million salary earners surveyed was up 6.7% year on year to R16,582. In real terms, salaries adjusted for inflation were up 1.9% on year-ago levels.
Average nominal take-home pay for the first eight months of 2024 was up 6.6% compared with the same period in 2023 and 1.3% in real terms.
“These numbers suggest 2024 is likely to be the best year for salaries since 2020 — or the first year in which the increase in average nominal take-home pay beats inflation since 2020. This improvement in purchasing power will go some way to provide much-needed relief to cash-strapped households and could provide support for consumer spending,” independent economist Elize Kruger said.
Consumer inflation has moderated markedly in 2024, dropping from an average of 6.9% and 6% in 2022 and 2023 respectively, to 4.4% in August — just below the midpoint of the SA Reserve Bank’s 3%-6% target range.
The Bank now expects inflation to average 4.6% in 2024 (down from 4.9% previously), with fourth-quarter inflation forecast to average 3.6%.
The improved inflation outlook contributed to the Bank’s decision last week to cut the repo rate by 25 basis points (bps) to 8%. It is widely expected that the Bank will announce another 25 bps cut in November and more, similar cuts in 2025.
The commencement of the SARB’s repo rate-cutting cycle, lower inflation, an almost six-month-long suspension of load-shedding and the market-friendly election outcome have helped boost consumers’ real disposable income.
This has, in turn, led to increased business confidence among retailers. The Bureau for Economic Research’s (BER) third-quarter retail survey published earlier this week showed business confidence among retailers increased by six percentage points to 45% in the third quarter.
The latest FNB/BER Consumer Confidence Index, which rose to a five-year high in the third quarter, provided further proof that South Africans were becoming more optimistic that their financial situation would improve over the next few months.
Apart from a deceleration in inflation and expectations of more interest rate cuts in the coming months, household finances have also benefited from a stronger rand exchange rate, substantial fuel price declines and the implementation of the two-pot retirement system on September 1, which provided consumers with access to a portion of their retirement savings.
Stats SA data showed that retail sales increased below expectations in July, rising 2% year on year, after lifting by 4.1% in June. However, economists expect a stronger spending rebound during the third and fourth quarters.
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