No good news for indebted consumers waiting for a raise

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Johannesburg - Chances of South Africans getting high take-home increases this year are quite slim, as taxes, inflation and garnishee orders continue to eat into disposable income.

This is according to Mike Schussler, the chief economist at economists.co.za, speaking after the release of the latest BankservAfrica disposable salary index on Friday.

Schussler said depending on their income bracket, consumers may have to cut entertainment, eating out and even holidays to pay for necessities.

The index data is collected on a three-month moving average basis and is adjusted for weekly payments and pension payments. Although it did not focus on salary payments of over R100 000 and pension payments, the index said, it was interesting to note that with the exception of December, for the first time more than 11 300 people received payments of more than R100 000.

About 30 percent of all employees take home more than the average salary of R11 923, while about 70 percent of the workforce takes home less.

Consumers had some financial relief over December, when their take-home pay was higher than a year before, the index said, but indications were that the rise in disposable income would again be slower than inflation for the rest of the year.

Brad Gillis, the chief executive of regulated products at BankservAfrica, said formal sector workers had had eight months of positive, real increases in take-home pay after four months of decline about a year ago.

Take-home salaries averaged R11 641 in February, which was 6.4 percent higher than a year ago, he said. However, in real terms, take-home pay increased by only 0.5 percent year on year in December.

On smoothed and adjusted January data, disposable income actually declined by R282 between January and February. The index showed that in December last year, the average payment into people’s bank accounts was an unadjusted R12 834, just 2.3 percent up from December 2012.

“It is quite possible South Africans’ disposable salaries will again dip below the rate of inflation as inflation increases and salary increases decline in nominal terms,” said Gillis.

Schussler said that when inflation went up, South Africa would reach the point where people got a real flat increase.

“People only got 0.5 percent after inflation, but if inflation does not take into account that people in Gauteng have to pay for e-tolls now, it does not really measure the whole cost of living,” Schussler said.

Inflation, taxes and garnishee orders were eating up people’s salary increases. Everyone – including wealthy people – would feel the pinch and would have to cut back on luxury items.

“People will only afford to pay for electricity, home mortgages and other necessities,” Schussler said.


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