South Africa’s Take-Home Pay Rises, Job Market Stabilizes Amid Inflation Battle

The BankservAfrica Take-home Index (BTPI) recorded a slight recovery in February 2023, indicating the potential stabilization of the job market in South Africa. The data revealed that the average nominal take-home pay increased to R15,186 in February, marking the highest level since October 2022. However, this figure remains 1.8% below the R15,469 measured a year prior, according to Shergeran Naidoo, BankservAfrica’s Head of Stakeholder Engagements.

1. The average nominal take-home pay for South African workers increased to R15,186 in February 2023, indicating a stabilizing job market despite the ongoing challenges posed by inflation.
2. High inflation rates have led to an 8.3% year-on-year decline in the average real take-home salary in February 2023, causing reduced household consumption and a drop in consumer confidence levels.
3. While the job market shows signs of recovery, South Africa continues to face economic struggles, including high inflation, slow economic growth, and the lingering impacts of the Covid-19 pandemic.

Despite the seemingly positive nominal take-home pay increase, the inflationary impact on South Africans’ earnings has been significant. BankservAfrica’s data highlights an 8.3% year-on-year decline in the average real take-home salary for February 2023, falling to R14,225 from R15,510 in the previous year. Consequently, this decrease in earnings has contributed to reduced household consumption expenditures and a substantial dip in consumer confidence levels, as reported in the recent FNB/BER Consumer Confidence Index (CCI). The CCI plummeted to -23 index points in Q1 2023, reflecting consumers’ concerns about South Africa’s economic outlook and the state of their household finances.

The persistently challenging economic environment has affected numerous companies, which face difficulties such as ongoing load shedding, high production costs, elevated interest rates, and diminishing demand, ultimately leading to disappointing growth rates. Nevertheless, the most recent BankservAfrica data implies that the job market in South Africa is stabilizing, as Naidoo observed.

Following two consecutive months of significant declines in the number of salaries deposited into South African bank accounts, BankservAfrica’s data—adjusted for weekly payments—suggests that a modest number of jobs were created in February. Independent economist Elize Kruger commented that any stabilization in the job market, however small, is a welcome development amidst the challenging economic landscape.

“The job market is still recovering from heavy losses that occurred due to the impact of the Covid-19 pandemic,” Kruger explained. According to the December 2022 Quarterly Employment Statistics report, employment in the non-agricultural business sector stood at 9.968 million at the end of 2022, compared to the pre-pandemic level of 10.3 million in Q1 2020.

However, the job market continues to lag behind as it struggles to catch up in the face of South Africa’s low-growth reality. Kruger added, “With little indication of a notably different economic environment in 2023, but rather even lower economic growth forecasted for 2023 compared to 2022, the job market is likely to remain lacklustre.”

Consumer inflation, which has been moderating slowly, also contributes to the ongoing erosion of households’ purchasing power. In 2022, consumer inflation reached a 13-year high of 6.9% and is predicted to average around 5.8% in 2023. However, February’s headline and core inflation rates unexpectedly rose to 7.0% year-on-year and 5.2% year-on-year, respectively.

Regarding private pensions, the BankservAfrica Private Pensions Index (BPPI) reported that the nominal figure remained relatively flat compared to the previous month, standing at R10,054, which is 6.2% higher than the same period last year. This figure is also slightly above the monthly average in 2022, which reached R9,985, as stated by Naidoo.

In real terms, the average real private pension in February 2023 amounted to R9,473, marginally lower compared to the same period a year prior. This finding suggests that the purchasing power of pensioners has been largely preserved in the face of the high inflation environment.

Table: Key Economic Indicators for South Africa (February 2023)

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