The BankservAfrica Take-home Pay Index (BTPI) continued its upward trajectory in January as the rate of inflation eased, bringing relief to wage earners. However, there are looming concerns, particularly for taxpayers in South Africa.
Shergeran Naidoo, head of Stakeholder Engagements at BankservAfrica, said that in January, the nominal average take-home pay stood at R15,670, marking a 9.1% year-on-year rise from a low base, with
a 1.5% increase from December's R15,533.
Real take-home pay reached R13,968 in January 2024, indicating a 3.5% year-on-year improvement and suggesting a slowdown in the erosion of purchasing power experienced by wage earners in 2023.
However, the government's decision not to adjust income tax brackets for inflation, announced during the 2024 National Budget Speech, threatens financial strain.
“This essentially means that a salary increase could push salary earners into a higher income tax bracket. Affected individuals could end up paying tax at a higher rate – and take home a lower salary than before the increase,” said independent economist, Elize Kruger.
This 'bracket creep' is projected to generate an additional R16.3 billion in taxes in FY25. With the government planning to maintain this policy for at least three years, it could diminish tax-paying salary earners' incomes by R52.2 billion over this period.
Headline CPI moderated significantly from 6.9% in January 2023 to 5.3% in January 2024. While fuel and food price inflation eased over the past year, early 2024 saw some potential upward risks, including a depreciation of the rand exchange rate, which could exacerbate inflationary pressures.
Coupled with considerable increases in medical aid premiums in February, a scenario of elevated headline CPI for several months seems probable. Consumer inflation for 2024 is forecasted around 5.3%, slightly higher than consensus expectations.
Despite these challenges, forecasts of interest rate cuts and modest economic growth of 1.3% in 2024, albeit better than 2023, may offer some relief to households later in the year.
The BankservAfrica data indicates that economic difficulties have hindered companies' ability to implement inflation-related salary increases over the past 18 to 24 months.
However, with expectations of improved economic conditions and less load shedding in 2024, the labor market could see some positive developments in wage settlements and job creation.
In January 2024, the BankservAfrica Private Pensions Index (BPPI) slightly decreased in nominal and real terms but remained positive on an annual basis.
"The nominal private pension dipped to R10,616 compared to the previous month's R10,642 but remained 5.7% higher than a year earlier," said Naidoo.
This suggests that pensioners' purchasing power has largely been preserved despite persistent inflation. Similarly, the average BankservAfrica BPPI increased by 0.8% in 2023, maintaining its inflation-beating trend into January 2024.
Comments