South African wage earners are feeling the pinch of rising inflation and higher interest rates, with take-home pay declining in August despite remaining above year-ago levels. According to PayInc's latest net salary index, the average nominal net monthly salary of about 2.1-million people dipped 0.1% to R21,622 in August compared with July. Although this represents a 1.9% year-on-year increase, factoring in inflation means salaries were 0.5% lower in real terms at R20,164 a month.
The decline in purchasing power is having a significant impact on low-income households, with the Pietermaritzburg Economic Justice and Dignity Group (PMBEJD) reporting that the average cost of the basic household food basket increased further in August and September. The basic nutritional food basket, designed to include food that constitutes proper and healthy nutrition, was pegged at R6,655.29 in September, indicating a R1,167.23 gap between what food those families should buy and what they can afford.
The PMBEJD's household affordability index tracks the prices of 44 basic foods from 52 supermarkets and 36 butcheries in seven major cities across South Africa. According to the index, the average cost of a basic food basket for low-income families increased by 0.2% to R5,488.06 in August and September and by 2% year on year. This has significant implications for household health and nutrition, as the gap between what women are able to buy for their families and what they need to buy for proper nutrition widens.
The situation is expected to worsen, with the conflict in the Middle East driving fuel and other costs higher, accelerating the rate of price increases. Independent economist Elize Kruger at PayInc noted that this erodes purchasing power, discretionary spending, and confidence. The consumer price index is expected to push above 5% in October, pulling further away from the South African Reserve Bank's 3% target.
The expected upward trend and the risk of rising inflation expectations triggered another 25 basis point interest rate hike last week, adding to the first increase of the year in May. This adds further strain on salary earners' budgets, with the benchmark interest rate now 50 basis points higher so far in 2026. According to Kruger, this will likely keep household budgets under pressure, particularly for higher-income earners.
The PMBEJD calculates that, based on the national minimum wage of R30.23 an hour and R5,078.64 for an average 21-day working month, low-income households have limited funds left to spend on food after paying for transport and electricity. In September, electricity and transport took up R3,279.45 (64.6%) of a worker's wage, leaving R1,799.19 for food and other expenses. If all of this amount were spent on food, it would provide R449.79 per person a month, well below the national food poverty line of R868 per person.
As financial and economic circumstances worsen, household health and nutrition are likely to suffer. The PMBEJD noted that the gap between what women are able to buy for their families and what they need to buy for proper nutrition widens, highlighting the need for urgent attention to address the rising costs of food and other essential expenses. With wages under pressure and inflation expected to remain elevated, households will need to adapt to a new reality of limited financial resources.
Key points
- The average cost of the basic household food basket for low-income families in South Africa increased by 0.2% to R5,488.06 in August and September.
- Take-home pay in South Africa declined by 0.1% to R21,622 in August compared with July, despite a 1.9% year-on-year increase.
- The conflict in the Middle East is expected to drive fuel and other costs higher, accelerating the rate of price increases and eroding purchasing power.
