According to the latest BankservAfrica Take-home Pay Index, the average nominal take-home pay in South Africa dropped in December, marking a low point in compensation for the year and starting households off on a difficult footing in 2023. The average nominal take-home pay was recorded as R14,633, which represents a decrease of 4.8% compared to the R15,403 recorded in the previous year. For the entire year of 2022, the average nominal take-home pay was R15,055 per month, which is unchanged from 2021. This stagnant trend is attributed to the challenging economic conditions in 2022, including rising costs of living, higher interest rates, and the worst year of load shedding, which negatively impacted growth. This led to a decline in South Africans’ purchasing power and a lack of household consumption. The South African Reserve Bank recently reported that growth in the nominal remuneration per worker in the private sector remained unchanged at 5.7% y/y.

The average wage settlement rate in collective bargaining agreements came to 6.0% in the first nine months of 2022, which provides evidence that nominal wage increases lagged on actual inflation trends during 2022 and even more so in real terms, as confirmed by BankservAfrica’s data that reflected a 6.9% y/y decline in the real average salary recorded in 2022, compared to 2021. Independent economist, Elize Kruger, said that this has given rise to a notable erosion of South Africans’ purchasing power, a trend that filtered through to lacklustre consumption expenditure by households in 2022. However, despite these conditions, employment levels have picked up, though playing catch-up for the job losses incurred from the Covid-19 pandemic, BankservAfrica said. Adjusted for weekly payments, BankservAfrica’s data suggests that 1.072 million more salaries were paid into South Africans’ bank accounts in 2022 compared to the previous year. The positive trend in employment was confirmed by the latest StatsSA Labour Force Survey, indicating 1.22 million job opportunities were created in the first three quarters of 2022, though still not back at pre-Covid levels.

Despite the higher inflation, the BankservAfrica Private Pensions Index (BPPI), in nominal terms, rose to R10,016 in December, showing a 7.2% year-on-year growth, according to Naidoo.

“The average nominal BPPI in 2022 came to R9 982, also 7.2% up on the 2021 average. In real terms, the average real private pension in 2022 was R9 576, 0.3% higher than a year earlier, as such preserving the purchasing power of pensioners,” he added.

Looking ahead, there are many indications that South Africans can expect ‘more of the same’ in 2023, as the main challenges will likely prevail.

“The ongoing energy supply problems, in addition to elevated input costs, rising interest rates and increasingly higher wage demands, are placing downward pressure on company profits and margins. Furthermore, a less favourable global economic backdrop adds to the economic challenges for many sectors,” said Kruger.

One silver lining is the expectation that consumer inflation should moderate to an average of around 5.5% compared to 6.9% in 2022, supporting consumers’ purchasing power in the coming months.

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