SA salaries and wages increased at a slower rate than inflation in 2022 and 2023, leaving households worse off and able to afford less with the money they were earning. But some recent economic data releases suggest an increase in household buying power may be on the cards in 2024.
According to BankservAfrica’s take-home pay index for June, which was released on Wednesday, the average nominal take-home pay for 4-million salary earners surveyed was up 6% year on year. In real terms, salaries adjusted for inflation was up 0.7% on year-ago levels.
Average nominal take-home pay for the first half of 2024 was up 6.7% compared with the same period in 2023 and 1.3% in real terms.
“If this trend could be sustained throughout the year, 2024 will be the first year in which the increase in average nominal take-home pay beats inflation since 2020,” said independent economist Elize Kruger in response to the data from BankservAfrica.
Four months of no load-shedding was a “significant hampering factor that has been removed” for companies, which should, in time, result in a better probability for salary increases, Kruger said.
However, according to the Bureau for Economic Research’s second quarter survey of inflation expectations, salaries and wages were expected to increase 4.9% in 2024.
Given the SA Reserve Bank’s latest forecast that headline consumer inflation would average 4.9% in 2024, a 4.9% increase in wages and salaries would leave South Africans neither worse nor better off in terms of spending power.
Stats SA inflation data for June showed headline consumer inflation easing to its lowest point in six months, having decreased to 5.1% from 5.2% in May and April.
According to findings from PwC SA’s recent consumer survey included as part of its latest economic outlook, consumer buying power might only improve in 2025, with salaries and wages expected to increase by 4.9% against average inflation of 4.8%.
Concerns about the cost of living were frequently identified by South Africans as something that keeps them up at night, but there were now early signs that consumer sentiment might be turning, PwC chief economist Lullu Krugel said.
“The majority of our survey respondents (60%) expect to spend more on essentials like groceries, clothing, and healthcare products in the next six months, while fewer (42%) expect to spend more on comfort and luxury goods like electronics and sports equipment,” PwC said.
Some of the trends supporting more optimistic household sentiment towards retail spending include the recent, sustained decline in load-shedding and expectations that interest rates will come down before the end of 2024, said PwC Africa retail and consumer leader Anton Hugo.
Stats SA’s retail trade sales data for May showed that purchases from retailers increased by 0.6% for the three months to end-May when compared with the previous three months.
Kruger said that despite the more positive outlook, it was unlikely household spending would recover to a level where there could be a demand-driven pull on inflation any time soon.
“Disposable income growth and unemployment would have to recover much more before we will start seeing demand-led inflation pressure,” she said.
The latest Old Mutual Savings & Investment Monitor survey, which was also released on Wednesday, said financial stress among working South Africans had significantly decreased. The percentage dropped from 58% in 2020 to a reassuring 37% in 2024. Moreover, 68% of employed South Africans were optimistic that their financial situation would improve in the next six months, up from 53% in 2020.
“The survey revealed that respondents are increasingly finding innovative ways to improve their financial wellbeing, from engaging in side hustles to participating in the gig economy,” said Vuyokazi Mabude, head of knowledge and insights at Old Mutual.
“The survey found that 57% of South Africans now juggle multiple income streams, up from 50% in 2023, showcasing a significant trend towards financial diversification,” Mabude said.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.