South African net salaries held largely steady in February but could be eroded in coming months by the escalating Middle East conflict which has businesses on tenterhooks and could threaten jobs, according to national payments utility PayInc.
The PayInc net salary index, which tracks the nominal net salaries of an estimated 2.1-million people earning between R5,000 and R100,000 per month, edged up 0.1% in February from January, representing an average nominal wage of R21,550. This was a 2.2% increase over the February 2025 index.
The conflict pitting the US and Israel against Iran has sent oil prices skyrocketing and created uncertainty, with South African businesses and salary earners likely to face increasing pressure in the months to come.
“While the full impact of the war is unclear, it is expected to have ripple effects on global and local economies,” independent economist Elize Kruger said when commenting on the index.
“Even if the conflict is short-lived, it is likely to place pressure on economic growth, inflation and household finances in the months ahead.”
The PayInc index is published on a monthly basis at nominal prices, seasonally adjusted and smoothed by using a three-month moving average. It is also published as a real index, deflated by headline consumer inflation.
In real terms, the PayInc net salary index declined by 1.2% in the first two months of the year, reflecting the moderate upward trend in inflation since early last year, though the gauge slowed to 3% year-on-year in February, in line with the South African Reserve Bank’s (Sarb) newly adopted target.
“Unfortunately, this will last for only a short duration, as the expected spike in fuel prices in early April will likely derail the moderate inflation outcome previously envisaged,” Kruger said.
The latest daily estimate from the Central Energy Fund shows the price of 95-grade unleaded petrol is on track to surge by R5.72 a litre from April. The price is currently R20.30 in Gauteng.
The government sets fuel prices on a monthly basis, depending on global oil prices and the rand exchange rate, among other factors. It tracks the daily actual cost of importing fuel versus the price currently in effect.
If the numbers show an under-recovery it means fuel is too cheap in relation to current costs and the price must go up the next month. An over-recovery points to the opposite.
A steep fuel price jump as currently indicated would see inflation accelerate in April — some economists have predicted as high as 4.5% — tying the central bank’s hands on any possible interest rate cuts this year and even raising the prospect of an increase.
The SARB is expected to keep the benchmark repurchase rate at 6.75% on Thursday.
“The worsening inflation scenario will hit the purchasing power of salary earners, and likely sustaining negative net salary growth in real terms for the foreseeable future. Given the importance of consumer spending as a growth driver in the South African economy, the broader economy will also take a hit,” Kruger said.
The worsening geopolitical outlook also bodes ill for South Africa’s economy — which only expanded by 1.1% in 2025 — and by extension the wellbeing of companies and their capacity to employ.
Unemployment is at 31.4% as of the fourth quarter of 2025 and the government has acknowledged the current GDP growth rate is inadequate to significantly reduce it.
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.