Salaries in South Africa stabilised in the first quarter of 2026, although economic uncertainty linked to the war in the Middle East is expected to weigh on the outlook for the remainder of the year.
The PayInc net salary index, which tracks the average nominal net salaries of about 2.1-million people earning between R5,000 and R100,000 a month, was up 2.3% year on year at 21,508 in March. This was a 0.1% increase on the February index.
The index, however, declined by 1% in real terms in the first three months of 2026.
“While both headline and core inflation remained well under control and aligned with the Reserve Bank’s newly adopted inflation target up to March, the significant fuel price spikes in April have derailed the favourable outlook for inflation envisaged at the start of the year,” said independent economist Elize Kruger.
Consumers are set to feel the pressure of steep fuel price increases in coming months, although the government has stepped in twice now to mitigate the initial impact of a surge in global oil prices after the US and Israel launched a war on Iran in late February which has severely hampered supply.
Earlier this week, the Treasury and the department of mineral and petroleum resources announced the extension of a R3 reduction in the general fuel levy for petrol by another month and paused the R3.93 tax on diesel altogether, ahead of another round of substantial price increases at the pumps from next Wednesday, May 6.
This will bring the total estimated cost of the temporary fuel levy relief introduced on April 1 to R17.2bn in forgone tax revenue.
“Lowering the fuel levy will moderate the direct impact of the fuel price increases on consumer inflation, which will be helpful from a monetary policy point of view, hopefully reducing the chance for pre-emptive interest rate hikes, in response to the higher near-term consumer price inflation,” Kruger said.
The Reserve Bank has already warned that inflationary pressures stemming from the Middle East conflict could force it to hike its benchmark policy rate at least once this year. The anticipated worsening inflation scenario will hit salary earners’ purchasing power, likely resulting in negative net salary growth in real terms in 2026.
Unionised sectors of the economy will probably demand higher annual salary increases to mitigate the negative impact of higher transport costs on workers’ purchasing power, the PayInc report said, adding that the private sector could respond by moderating wage offers to maintain employment.
In the latest Bureau of Economic Research inflation expectations survey, analysts and business people forecast nominal salary growth of 4.1% and 4.7% respectively for 2026, whereas trade union officials predicted 5.1%.
“With the uncertainties about the eventual impact of the war on the local and global economy likely to loom for some time, the South African economy enters a period where companies will most probably retreat to conservative mode, taking a wait-and-see approach, and postpone major decisions until there’s more clarity,” Kruger said.
“This could have a negative impact on employment prospects and earnings expectations in the remainder of 2026.”
Business Day
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