South Africans kicked off 2025 with a significant lift in their earnings as the average nominal take-home pay rose 16.3% year-on-year to R18,098 in January, according to BankservAfrica’s Take-home Pay Index (BTPI) report.
BankservAfrica’s Shergeran Naidoo says this represents a considerable increase from R15,564 in January 2024 and a further improvement on December’s R17,246.
The BTPI monitors the average nominal take-home pay of about 4-million salary earners in SA.
According to a press release from the payments clearing house, the salary gains reflect an improving business environment, declining inflation and interest rate cuts that provided relief in 2024.
“The anticipated improvement in the business environment is expected to enable companies to offer more substantial salary increases in 2025, which in combination with a moderate inflation environment could mean a second consecutive year of a real increase in take-home pay,” said Elize Kruger, independent economist.
Real take-home pay, which accounts for inflation, climbed 12.8% year-on-year to R15,659 in January — the highest level since February 2022.
Kruger noted that this was driven by the significant moderation in consumer inflation last year — “from 5.3% in January to 3.0% in December, which has had a positive impact on the purchasing power of salary earners”.
“Additionally, the headline CPI averaged 4.4% in 2024, the lowest annual rate since 2020.”
Had the 2025 national budget been tabled with the proposed two-percentage points VAT increase, it would have derailed the positive inflation outlook somewhat, eroding the fragile recovery in the purchasing power of salary earners
— Elize Kruger, independent economist
She said the average real take-home pay in 2024 rose by 3.1% to R14,292, marking the first year of real wage growth since 2020.
Improved earnings and the recovery of disposable income have already translated into healthier spending.
According to the BTPI report, retail sales grew 2.5% in 2024 after contracting 1.2% the previous year, while passenger car sales rebounded with a 1.1% annual increase.
Supportive factors include the Reserve Bank’s cumulative 75-basis-point rate cuts and withdrawals under the Two-Pot Retirement System, which released R43-billion into the economy.
If inflation remains contained, Kruger believes salary gains seen in 2024 could continue to strengthen.
On the economic front, real GDP growth is forecast to increase by 1.7% in 2025, somewhat higher than in 2024.
“The acceleration in growth will be driven by a combination of improved household consumption expenditures, higher fixed investment spending, and further advances in structural reforms,” Kruger said.
She noted that an ongoing focus on improving SA’s electricity generation capacity, addressing supply chain blockages relating to freight rail and port operations, and upgrading water infrastructure, among others, are much-needed actions to propel the economy forward.
However, the upbeat picture could be clouded by fiscal policy developments.
“Had the 2025 National budget been tabled with the proposed two-percentage points VAT increase, it would have derailed the positive inflation outlook somewhat, eroding the fragile recovery in the purchasing power of salary earners,” she said.
Last week, the budget was rejected at the eleventh hour before being tabled in parliament.
“While we await the revised budget on March 12, the postponement has introduced uncertainty, raising concerns about its potential impact on the economy’s recovery prospects,” Kruger added.
Food inflation eases further
According to Wandile Sihlobo, chief economist at Agbiz, consumer food price inflation continued to moderate, slowing to 1.5% in January from 1.7% in December.
This comes after Stats SA released the January inflation data on Wednesday, showing that the headline CPI rose to 3.2% in January, up from 3.0% in December last year.
“The deceleration was underpinned by most products in the food basket, particularly meat, fish and other seafood, milk, other dairy and eggs, and fruit and nuts,” said Sihlobo.
He said “the base effects and the recovery in supplies of various products continue to be the primary drivers of the slowing rate of food price increases.”
Looking ahead, Sihlobo believes the outlook for food inflation remains generally favourable, supported by recent rains and decent planting activity across the country.
“Farmers (have) likely planted 4.45-million hectares of summer grains and oilseeds in the 2024-25 season, up mildly by 0.3% from the previous season,” he said.
“We see similar and better production conditions for fruits and vegetables.”
However, he cautioned that grain-related products could pose an upside risk to consumer inflation in the first half of 2025, particularly due to elevated white maize and feed prices due to the drought.
“Moreover, we suspect that poultry products and other red meat prices could increase moderately in the coming months because of higher feed costs, mainly soybeans and yellow maize prices, which are elevated as the country awaits a new crop season.”
However, he said these product price increases are unlikely to be notable as the consumer is also broadly under pressure, and the demand may still be relatively weak.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.