The average salary in South Africa has weakened amid the underperforming economy, high unemployment rate, soaring inflation and the impact of the Covid-19 pandemic, according to financial infrastructure services company BankservAfrica's 'Five-year Review of Take-home Pay and Private Pensions in South Africa for February 2018 – February 2023' report.

Between 2018 and 2021, the nominal take-home pay kept up with inflation. However, in 2022, it took a turn for the worse as the nominal average take-home pay stagnated, falling behind the rising cost of living, says BankservAfrica stakeholder engagements head Shergeran Naidoo.

“The average nominal salary, measured in the BankservAfrica Take-home Pay Index, increased from R12 573 in February 2018 to R15 438 in February 2023, showing growth of 22.8%. However, when compared with the 26.6% increase in the Consumer Price Index (CPI), published by Statistics South Africa, this figure confirms that the nominal take-home pay has lagged behind inflation,” he says.

The highest average take-home pay salary was recorded in February 2022 at R15 760 a month, whereas the lowest average occurred in April 2019 at R12 446 a month.

“Over the past 18 months, the economic environment has been exceptionally challenging for companies. The rampant loadshedding, high production costs due to escalating fuel prices, weaker currency and rising wage pressures, elevated interest rates and moderating demand have all contributed to the dismal growth,” says independent economist Elize Kruger.

“Companies have indicated a shift from potential expansion and investment to becoming less dependent on Eskom and have redirected capital earmarked for investment towards self-sufficiency. This conservative survival approach is not conducive to employment growth in South Africa, and also keeps a lid on salary increases, as indicated in the BankservAfrica Take-home Pay Index’s performance in 2022,” she notes.

The number of salaries paid into the bank accounts of South Africans is an early indicator of the state of the employment market. Over the past five years, the number of salaries paid increased by only 455 140, further reflecting the dismal state of the economy, BankservAfrica points out.

The period under review revealed an underperforming economy with the highest unemployment rate in the world and a scenario where rising inflation has been eroding the purchasing power of salary earners.

The average real gross domestic product growth rate for the five-year period 2018 to 2022 realised a marginal 0.5% a year increase and the middle year, 2020, was the global pandemic-induced recession year.

With indications of an even lower economic growth forecast for 2023 compared with 2022, the economic environment will most likely remain bleak, resulting in a challenging job market and little room for salary improvements.

Meanwhile, in contrast to the salary movements, a five-year review of the BankservAfrica Private Pensions Index (BPPI) revealed the nominal BPPI rose from R7 001 in February 2018 to R10 054 in February 2023, reflecting an increase of 43.6%, which is markedly above the CPI measured over that period.

“The highest average nominal pension payment was recorded in July 2022 at R10 483 per month, whereas the lowest average was registered in February 2018 at R7 001 per month,” says Naidoo.

Although pension payments have held up well against inflation, pension payments are still lower than the average salary in South Africa, he says.

“According to the BankservAfrica data, the proportion of average pension payments relative to the average take-home pay has risen from 55.7% in February 2018 to 65.1% in February 2023, reiterating the finding that these payments have fared better than average salaries in the difficult economic environment,” says Kruger.

The investment performance may have been a contributing factor, combined with the resilience attributed to the composition of pension receivers.

The ratio of average pension payment to average take-home pay has risen from 55.7% in February 2018 to 65.1% in February 2023, confirming the narrative that pension payments fared better than average salaries in the difficult economic environment.

A key observation of the special report is the discrepancy in trends between take-home pay and pension payments, which seems to be a structural phenomenon rather than a cyclical one.

“Expect the nominal take-home pay to continue lagging on inflation in the months to come, unlike private pensions, where the underlying fundamentals of the data suggest it will continue to outperform take-home pay. Until the economic narrative could meaningfully change, expect more of the same in the medium-term for the BankservAfrica BTPI and BPPI,” says Kruger.