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Under Pressure: Sky rocketing inflation takes a toll on salaries

June is the second consecutive month that nominal salaries have remained below the R15 000 mark and 1.8 percent lower compared to a year ago. Photographer: Karen Sandison.

June is the second consecutive month that nominal salaries have remained below the R15 000 mark and 1.8 percent lower compared to a year ago. Photographer: Karen Sandison.

Published Jul 29, 2022

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Sky-rocketing inflation rates were taking a toll on the average salaried worker, as reflected by the latest monthly BankservAfrica Take-home Pay Index (BTPI).

The payment clearing house said this combined with recent interest rate hikes and weakened rand exchange rate, the load shedding issues, as well as rising fuel, food and administered prices, were putting the purchasing power of South Africans under huge pressure. It said that as a result, low confidence levels were evident among consumers and businesses.

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Shergeran Naidoo, BankservAfrica’s head of Stakeholder Engagements, said yesterday that reflecting the dismal economic environment and the impact of inflation, the BTPI showed that the average nominal salary had been moderating notably from R15 570 in February to R14 600 in June.

“June is the second consecutive month that nominal salaries have remained below the R15 000 mark and 1.8 percent lower compared to a year ago,” Naidoo said.

In four of the past seven months, there has been negative year-on-year growth for nominal wages. The rising inflation rate, which Stats SA reported hit a 13-year high of 7.4 percent for June last week, spelled trouble for the average salaried worker.

Independent economist Elize Kruger said aligned with global trends, local consumer inflation increased to a 13-year high of 7.4 percent year-on-year in June, from 6.5 percent year on year (y/y) in May, running notably ahead of wage increases in the economy and as such having a meaningful negative impact on South Africans’ purchasing power.

“This is reflected in a notable 7.8 percent y/y drop in the real salaries recorded in the BTPI,” Kruger said.

“With consumer inflation forecast to increase further in July, before reaching an upper turning point, more pressure can be expected on consumers and the economy at large.”

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The BTPI showed more people have been receiving salaries compared to a year ago. After adjusting for weekly workers, the BankservAfrica data indicated that about 300 000 more salaries were paid in quarter two 2022 compared to quarter one 2022 (more than 370 000 new employment opportunities in quarter one).

The clearing house said the gradual relaxation of Covid-19 restrictions and the final removal of all lockdown restrictions, effective from June 23, would have had a positive impact on employment opportunities for seasonal and temporary workers.

Meanwhile, the BankservAfrica Private Pensions Index (BPPI) showed that the average nominal private pension reached R10 000 per month for the first time, representing a 9.1 percent growth on a year-on-year basis, according to Naidoo.

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In real terms, the average real private pension was R9 673 per month, 1.5 percent higher than a year earlier. Although there were monthly real declines recorded in three of the past six months, average real pensions had held up reasonably well despite rising inflation, the index found. The total take-home pay and private pensions processed in value terms increased by 4.8 percent in real terms and by 12.6 percent in nominal terms, not seasonally adjusted.

BankservAfrica said with the ever-increasing pressure on the disposable income of households, consumer spending, which contributed about 63 percent of South Africa’s gross domestic product, was likely to falter in the coming months. The sources of higher inflation, specifically higher food, fuel and administered prices were still in a relentless upward trend and unlikely to abate in the short term, while the risk of second-round effects on the consumer basket was on the rise.

It warned that consumers would have to brace themselves for an average headline consumer price index of around a forecast 7 percent in the second half of this year, which would further erode purchasing power.

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“As such, more real declines in average salaries could be expected in coming months.”

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