Fuel hikes sharply impact South Africans’ take-home pay

CAPE TOWN – Although take-home pay was slightly up last year, 2018 was still the most difficult year for salary adjustments in the last five years while the increase in private pensions will mean that pensioners will be an important part of South Africa’s economy.

This is according to the latest BankservAfrica Take-Home pay Index released yesterday, which tracks about 3 million salary earners every month through about 4 million payments a month paid into the national payment system.

Shergeran Naidoo, head of stakeholder engagements at BankservAfrica said the take-home pay last year was impacted by factors such as fuel increases, resulting in inflation averaging at around 4.6 percent.

He said looking at the overall take-home pay for 2018 the data for the year showed that most people in the country were just about managing to make ends meet.

Naidoo added that judging from the data there was probably a better reliance on the economy from pensioners and is a scary trend.

He said private pensions had an increase of about 9 percent over the past five years.

Looking at the outlook for the rest of this year, Naidoo said that with this year being an election year for the country factors such as how the results played out could have an impact on the outlook although President Cyril Ramaphosa is currently trying his best to improve the situation by promoting foreign investments.

Naidoo said the average banked real-take home pay in December was R14 094, reflecting a 0.5 percent year-on-year change and a slight improvement from November while the nominal value was R15 045, a 5.5 percent change on December 2017.

Naidoo said the worst year for real take-home pay was 2016 where there was a 1.1 percent decline in take-home pay after inflation while all the other years showed an increase of which last year was the smallest.

He said that while last year’s data proved to be jittery, the overall data showed real take-home pay increased by just 0.4 percent in the South African economy.

Naidoo said that with inflation averaging 4.6 percent for 2018, the average employees increase was above the price level changes as measured by the inflation basket.

However, towards the year-end, take-home pay declined as inflation shot up as a result of the fuel price increases.

According to Mike Schüssler, chief economist at Economistscoza, the dust settled in December when the actual take-home pay increased slightly.

Schüssler added that the weak economy is not helping South Africans get salary increases although the average increase for the year is just above inflation.

“Some salary increases were above 7 percent, which after tax and inflation would have resulted in an estimated 1.8 percent in real after-inflation terms. Many private sector firms, however, remain under pressure resulting in less than inflation increases. Many employees are struggling to maintain their standard of living,” said Schüssler.

Naidoo added that the average real private pension was R6 855, a 3.5 percent year-on-year change.

“The increase in private pensions drawdowns can be owed to asset class performance which did not have a 4.6 percent return in 2018. And with an inflation average of 4.6 percent in 2018, the increase in private pensions was exactly double that of the inflation rate,” said Naidoo.

Schüssler said that with South Africa’s population growth rate at an estimated 1.7 percent and 3.4 percent for the population aged over 65, pensioners are the fastest growing expenditure group in the country.

“It is clear that pensioners are going to become even more important in the South African economy. With pensions growing at almost double the take-home pay rate, and more than double the working age proportion of the population, pensioners will become more important from a retail sales point-of-view,” said Schüssler.

BUSINESS REPORT ONLINE