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2024-01-31 12:59 PM

South African Take-Home Pay Rises, but Inflation Erodes Gains

  • Take-Home Pay Increase: South Africans experienced a 5.6% rise in average nominal take-home pay in 2023, reaching R15,409, reflecting positive economic growth.
  • Inflation Erodes Real Earnings: Despite the apparent increase, inflation, averaging 6.0%, led to a 4.7% drop in real take-home pay, revealing a persistent erosion in purchasing power for the third consecutive year.
  • Economic Challenges and Optimism: External factors, such as load shedding, impacted companies' profits, hindering their ability to provide inflation-related salary increases. However, projections for stable oil prices and the rand in 2024 offer optimism for lower inflation, potentially easing financial strain. Positive employment trends, with 399,000 jobs created, further contribute to the hopeful outlook for the South African economy.
By Miriam Matoma


In 2023, South Africans experienced a rise in take-home pay, but the glaring reality of diminished purchasing power due to escalating inflation cannot be overlooked. The BankservAfrica Take-home Pay Index (BTPI), a reliable measure reflecting the average nominal take-home pay of approximately 4 million salary earners in South Africa, reached R15,409 by the end of 2023—a noteworthy 5.6% surge from the R14,596 recorded in December 2022.

Despite this apparent increase, the impact of inflation, with an average Consumer Price Index (CPI) level of 6.0%, has cast a shadow over the actual earnings of South African workers for the third consecutive year. Real take-home pay, adjusted for inflation, stood at R13,732 in December 2023, revealing a 4.7% decrease compared to the previous year. This trend underscores a significant ongoing erosion in the purchasing power of salary earners, leading to heightened financial strain.

Elize Kruger, an Independent Economist, highlighted the palpable pressure on disposable income, evident in dwindling retail sales growth. Real growth for the eleven months leading up to November 2023 was 1.5% lower than the previous year. Additionally, passenger car sales experienced contraction in 2023, further illustrating the impact of reduced purchasing power on consumer spending habits.

BankservAfrica attributed these challenges to substantial increases in the operating cost environment, driven by both domestic and global factors, such as load shedding. These factors have adversely affected companies’ profits, hindering their ability to provide inflation-related salary increases over the past 18-24 months.

However, there is optimism for the year ahead. Projections indicate stability in international oil prices and the rand exchange rate on an annual average basis in 2024, which is expected to lead to a moderation in consumer inflation from 6.0% in 2023 to 5.2% in 2024. Lower inflation and subsequent reduced interest rates could alleviate financial strain for cash-strapped South African households, potentially boosting spending and confidence levels.

StatsSA’s latest Labour Force Survey (LFS) revealed a positive trend, with 399,000 jobs created in Q3, resulting in a decrease in the unemployment rate from 32.9% the previous year to 31.9%. BankservAfrica’s data supported this trend, indicating that 430,000 more salaries were paid in Q4 2023, suggesting a further easing of unemployment in the coming months.

Despite challenges, the BankservAfrica Private Pensions Index (BPPI) demonstrated resilience. Although it experienced a slight decline in nominal and real terms in the last five months of 2023, it remained in positive territory on an annual basis. Shergeran Naidoo, Head of Stakeholder Engagements at BankservAfrica, reported that the average nominal private pension fell slightly to R10,606 in December, yet it was still 5.7% higher than the previous year. The average private pension in 2023 increased by 6.8% year-on-year, indicating that pensioners’ purchasing power endured despite the high inflation environment. In real terms, the average BPPI saw a modest increase of 0.8%.

BankservAfrica emphasized that the value of total take-home pay and private pension payments processed in December 2023 increased by 6.0% and 0.8% in nominal and real terms, respectively, compared to the previous year on a non-seasonally adjusted and smoothed basis. This suggests that, despite the prevailing economic challenges, there are pockets of resilience and growth within the South African economy.

In conclusion, South Africa faces the dual challenge of increased take-home pay accompanied by a persistent erosion of purchasing power due to inflation. The economic landscape is characterized by both hurdles and hopeful indicators. While inflation remains a pressing concern, the potential stabilization in oil prices and the exchange rate, coupled with positive employment trends, offers a ray of optimism for South Africans. The delicate balance between rising incomes and the impact of inflation underscores the need for adaptive economic strategies to ensure sustained financial well-being for the nation.

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Miriam Matoma

Miriam is a freelance writer, she covers economics and government news for Rateweb. You can contact her on: Email: miriam@rateweb.co.za Twitter: @MatomaMiriam