The average take-home pay fell marginally in March due to various market and economic factors that have placed financial constraints on companies and pressure on salaries.
According to the BankservAfrica Take-home Pay Index (BTPI) released yesterday, take-home pay fell due to the weak level of the rand exchange rate and higher fuel prices, among others economic factors.
Shergeran Naidoo, BankservAfrica’s head of stakeholder engagements, said salaries in March declined below levels recorded the same month in 2023.
“The average real take-home pay, adjusted for inflation, tracked lower at R14 236 in March and slightly below year-ago levels,” Naidoo said.
However, the average salary moderated slightly in nominal terms to reach R16 043, still 5.0% up compared to a year ago, and 3.6% up on December’s R15 484.
A comparison of the average nominal BTPI in the first quarter of this year to the corresponding quarter one year earlier showed a 6.2% increase.
Independent economist Elize Kruger said if this continued, this year could be a better year for salaries as the business environment was expected to improve somewhat, unlike the previous two years, when companies struggled to pay inflation-related increases due to the ongoing economic challenges.
The authors of the BTPI said although mediocre economic growth of 1.1% was forecast for this year, it was somewhat better than the 0.6% of last year.
The improved outlook hinged on the assumption of reduced load shedding, a moderation in average inflation, and a start to the interest rate-cutting cycle.
Year to date, BankservAfrica data signalled an alignment with the South African Reserve Bank’s (Sarb) forecast of an average salary increase of 6.1% for this year.
A trend that has been developing recently, especially in the mining industry, was said to be for companies to enter into longer-term wage agreements, mostly with above-inflation outcomes for salary earners.
With the average headline consumer inflation forecast to moderate to 5.3% this year 2024 and 4.8% next year, workers locked into these agreements would then receive considerable real increases if lower inflation outcomes did materialise.
“Inflation has turned out to be quite sticky on the downward path, locally and globally, driven mostly by higher services and administered price inflation,” Kruger said.
Headline inflation moderated notably from 7.1% in March last year to 5.3% one year later, but is forecast to remain around the 5.3% - 5.5% level until September, and below 5% by year end.
“Positive real increases in average salaries in 2024 would be a welcomed development as salaried workers’ purchasing power will improve somewhat compared to the previous two years,” Kruger said.
Together with lower interest rates, financially stressed households’ spending ability and confidence levels could improve.
However, this may only happen in the second half of the year, they said.
BUSINESS REPORT