South Africans took home less money in August, with average net salaries slipping to R21,622 as inflation continued to eat into workers' spending power. The decline was 0.1% from R21,662 in July, but still 1.9% higher than a year ago. The PayInc Net Salary Index, which tracks the net salaries of about 2.1 million South Africans earning between R5,000 and R100,000 a month, revealed this information.
However, once inflation was taken into account, the decline was considerably steeper. Real net salaries fell 0.5% month-on-month to R20,164 and were 2.6% lower than a year earlier. Year to date, average net salaries were down 2.1% and 2.6% year-on-year in real terms, despite nominal salaries increasing by 1.6%. This has resulted in decreased purchasing power, discretionary spending, and confidence for households.
Independent economist Elize Kruger noted that after increasing in July for the first time in nine months, the index declined by 0.5% in real terms. She attributed this to the erosion of purchasing power, discretionary spending, and confidence. The pressure on salaries comes as workers also face higher borrowing costs and the prospect of renewed inflationary pressure.
The benchmark interest rate was 0.5 percentage points higher so far this year, adding to the strain on household budgets. PayInc said renewed conflict in the Middle East was expected to push headline inflation above 5% in October and keep it elevated for several months. Kruger predicted another interest rate hike due to the expected upward trend and the risk of rising inflation expectations.
Sector differences in salaries are substantial, with Statistics South Africa's latest Quarterly Employment Statistics showing average monthly gross earnings in the non-agricultural formal sector at R32,828 during the first half of the year. Workers in wholesale and retail trade, construction, and manufacturing earned less than the economy-wide average. In contrast, electricity, gas, and water workers earned an average R62,454 a month – about 90% more than the economy-wide average.
Eskom's own figures showed its average employee earned R941,933 a year, or R78,494 a month, while the median was R858,580 a year, equivalent to R71,548 a month. Earnings in the electricity and water sector also increased 9% in the first half compared with the same period last year, against economy-wide growth of 5.3%. Financial services workers recorded the lowest increase at 3.5%.
Kruger emphasized that sector differences show that salary earners are experiencing the current economic environment very differently. However, the broader PayInc Net Salary Index points to continued pressure, with rising inflation likely to delay a recovery in real purchasing power. As a result, South Africans may face ongoing challenges in maintaining their standard of living.
Key points
- South Africans' average net salary decreased to R21,622 in August.
- Real net salaries declined 0.5% month-on-month and 2.6% year-on-year.
- Sector differences in salaries are substantial, with electricity, gas, and water workers earning significantly more than the economy-wide average.
