Tag Archives: BankservAfrica

The real take-home pay, as tracked by BankservAfrica’s Take-home Pay Index (BTPI), saw a notable increase in February, highlighting the continued positive effects of inflation’s slowdown in 2024 on the purchasing power of salary earners.

While this trend supports consumption demand in the economy, salary earners continue to face pressures from the rising cost of living, elevated interest rates, and new taxes, which are straining household budgets.

These challenges have also contributed to a decline in consumer confidence during the first quarter of the year.

“Real take-home pay, adjusted for inflation, increased by 0.9% on a monthly basis to reach R15 799 in February,” said Shergeran Naidoo, BankservAfrica’s head of Stakeholder Engagements. “This also represented a notable improvement of 10.7% compared to the same period last year, marking the highest increase in three years.”

In 2024, real take-home pay averaged R14 292, reflecting a 3.1% increase— the first such growth since 2020. If inflation remains controlled, 2025 is expected to be the second consecutive year of positive real take-home pay growth.

The significant reduction in consumer inflation during 2024 had a clear, favourable effect on the purchasing power of salary earners. This trend is anticipated to continue into 2025, with the headline CPI projected to average just 3.6% in 2025, down from 4.4% in 2024, marking the lowest annual rate since 2020 when it stood at 3.3%.

“This is much needed as salary earners remain under pressure due to the soaring cost of living, high interest rates, and additional taxes, namely the higher VAT rate and no adjustment to tax brackets recently announced in the 2025 National Budget,” said independent economist, Elize Kruger.

Meanwhile, the nominal average take-home pay rose marginally to R18 241 in February 2025, compared to R18 141 in January, but still above the level of R15 983 a year earlier, continuing the upward trend in take-home pay over the past eight months.

According to publicly available data sources, the nominal salary increases for 2025 are forecast to range between 4.1% – 6.5%.

BankservAfrica pointed to a distinct trend emerging among companies with a strong unionised culture, where multi-year wage agreements have led to more consistent salary increases. T

This is typically from mining companies such as Harmony Gold, Amplats, Implats, De Beers, and Sibanye-Stillwater, all of which have entered into 5-year wage agreements between June 2022 and April 2024.

With agreements now in their second or third years and rendering average increases of around 6% in 2025, this has turned out to be beneficial for workers in an inflation environment of 3.6%, it said.

The trend is also evident in the state sector. In September 2024, the South African Local Government Association signed a five-year contract, starting with a 6% increase in the first year, followed by real increases of 0.75% to 1.25%.

Similarly, the 2025 public-service wage agreement spans three years, with a 5.5% increase in the first year—roughly two percentage points above inflation and exceeding initial expectations, according to Kruger.

This agreement is projected to cost the fiscus R23.4 billion more than planned over the next three years, contributing to National Treasury’s decision to raise taxes in the 2025 National Budget.

According to Kruger, based on a forecast average nominal salary increase of 5.3% and an average headline CPI projection of 3.6%, a real wage increase of 1.7% could be realised in 2025.

“This will be the second consecutive annual real increase and an important supporting factor for household consumption expenditure in 2025,” she said.

The cumulative 75bps reduction in interest rates and withdrawals from the Two-Pot Retirement System could further boost consumer spending.

The resulting recovery in disposable income is already evident in stronger retail sales, with real growth of 5.9% in the four months leading up to January 2025—significantly higher than the same period the previous year.

“The improved outlook for household consumption expenditure is a welcome development – especially as an increasing number of downside risks begin to cloud the 2025 economic horizon,” said Kruger.

The global economy has become increasingly uncertain, not only due to ongoing geopolitical tensions but also the potential negative impact of the evolving global trade war.

While the ultimate outcome on South Africa’s economy is still unclear, it is unlikely to be favourable and as such represents a downside risk to the real GDP growth forecast of 1.5% for 2025, the economist cautioned.

BankservAfrica’s Take-home Pay Index (BTPI), which tracks the average nominal take-home pay of around 4 million South African salary earners, reflects a strong stat to 2025 for the earnings landscape.

The average take-home pay rose to R18 098 in January 2025, compared to R17 246 in December 2024 and R15 564 one year earlier, said Shergeran Naidoo, BankservAfrica’s Head of Stakeholder Engagements.

This upward trend in average salaries, which began early in 2024, has shown resilience despite some monthly fluctuations, continuing to show incremental increases.

“This positive remuneration trend evident in the BankservAfrica sample reflects a generally improved business environment, notable moderation in inflation, higher confidence levels in the economy, and three interest rate cuts that have provided much-needed relief,” said Elize Kruger, independent economist.

Company profitability also improved during 2024, reflected in the above-inflation increase in the gross operating surplus of companies. The promising business environment was also highlighted by a substantial return on the FTSE/JSE All Share Index in 2024 (+13.4%), demonstrating the strong earnings potential of listed companies.

In real terms, take-home pay also rose to R15 659 in January 2025, marking a significant 12.8% increase compared to the same period last year, and reaching its highest level since February 2022.

This increase was driven by a substantial reduction in consumer inflation, which decreased from 5.3% in January to 3.0% in December, enhancing the purchasing power of South African salary earners.

Additionally, the headline Consumer Price Index (CPI) averaged 4.4% in 2024, the lowest rate since 2020.

“As such, the real take-home pay averaging R14 292, up by 3.1% in 2024, represented the first real increase in take-home pay since 2020,” said Kruger.

With inflation expected to remain moderate in 2025, with a forecasted average headline CPI of 4.2%, 2025 is expected to be the second consecutive year of positive real take-home pay growth.

This recovery in disposable income has been reflected in stronger retail sales, with real retail sales growth for 2024 at 2.5%, up from a -1.2% contraction in 2023.

Passenger car sales also started recovering in late 2024, with a full-year growth of 1.1%, compared to a -4.3% decline in 2023. The cumulative 75bps reduction in interest rates, coupled with Two-Pot Retirement System withdrawals, has supported consumer spending.

Looking ahead, the economic outlook for 2025 indicates that the salary gains seen in 2024 could continue to strengthen.

Real GDP growth is projected to increase by 1.7% in 2025, slightly higher than in 2024. This growth will be driven by a combination of improved household consumption, higher fixed investment spending, and ongoing structural reforms.

The continued focus on improving South Africa’s electricity generation, addressing supply chain blockages, and upgrading water infrastructure is expected to propel the economy forward.

“The anticipated improvement in the business environment is expected to enable companies to offer more substantial salary increases in 2025, which, combined with a moderate inflation environment, could lead to a second consecutive year of real increases in take-home pay,” said Kruger.

However, if the 2025 National Budget had introduced a 2% VAT increase, it could have negatively impacted the inflation outlook, potentially undermining the fragile recovery in the purchasing power of salary earners.

“While we await the revised budget on 12 March, the delay has introduced uncertainty, raising concerns about its potential impact on the economy’s recovery prospects,” said Kruger.

BankservAfrica’s Take-home Pay Index (BTPI), which tracks the average nominal take-home pay of around 4 million salaried individuals in South Africa, concluded 2024 with strong results, demonstrating a continuation of the upward trend observed throughout the year.

“The average take-home pay increased by 11.9% year-on-year, reaching R17,202 in December 2024,” said Shergeran Naidoo, BankservAfrica’s head of Stakeholder Engagements. “This marks a notable increase from the R15,367 recorded in December 2023.”

The steady rise in average salaries was apparent throughout the year, despite some monthly fluctuations.

“The BTPI highlighted 2024 as the most significant salary growth year since 2020,” said Elize Kruger, independent economist. “This positive trend was supported by an improving business environment, the suspension of load shedding, moderating inflation, political shifts, and two interest rate cuts. Additionally, enhanced company profitability, reflected in an increase in gross operating surplus, further boosted salaries.”

In 2024, nominal take-home pay rose by 7.9%, marking the highest growth rate in recent years. However, it’s important to note that this increase comes after two challenging years, as 2022 and 2023 saw minimal salary growth. With inflation easing considerably in 2024, employees enjoyed better purchasing power in real terms.

“This recovery in disposable income is reflected in stronger retail sales,” adds Kruger. “Real growth for retail sales in the eleven months to November 2024 was 2.4% higher than the same period the previous year, with positive growth also seen in passenger car sales.”

In real terms, take-home pay climbed to R14,887 in December 2024, marking an 8.7% increase from the previous year. With consumer inflation averaging 4.4% in 2024—the lowest rate since 2020—the purchasing power of South Africa’s salary earners significantly improved. Real take-home pay averaged R14,292 for the year, up 3.1%, signalling the first real increase since 2020.

Looking ahead, South Africa’s GDP is expected to grow by 1.7% in 2025, slightly higher than 2024, fuelled by stronger household consumption, higher investment spending, and structural reforms.

The continued focus on enhancing South Africa’s electricity generation capacity, addressing freight rail and port bottlenecks, and upgrading water infrastructure is expected to bolster the economy. These improvements could lead to more substantial salary increases in 2025.

The rise in purchasing power witnessed in 2024 is expected to persist into 2025, providing much-needed relief to households and further supporting consumer spending.

With consumer inflation easing from 5.3% in January 2024 to 3% in December, and an expected 4.2% average for 2025, employees can look forward to several years of real salary increases, leaving more room for discretionary spending.

The South African Reserve Bank’s latest Quarterly Bulletin reported a 5.2% nominal salary increase in the first half of 2024, compared to an average of 4.5% in 2023. With anticipated real increases, salary growth could reach around 5.7% in 2025, depending on factors like employer financial health, employee performance, and talent retention goals.

“With all these positive shifts, salaries are expected to continue building on the gains made in 2024 as we move into 2025,” said Kruger.