South Africa’s generally dismal economic environment has contributed to the average nominal take-home pay slipping further in April, according to the monthly BankservAfrica Take-home Pay Index (BTPI).
The number of salary payments has also fallen, thereby signalling a troubled job market.
Shergeran Naidoo, BankservAfrica’s Head of Stakeholder Engagements, said the average nominal take-home pay was R14 534, showing a sizeable decline on the R15 170 recorded a year ago.
As companies come under strain from the harsh load shedding, high production costs, rising interest rates and moderating demand, the environment remains unfavourable for comfortable wage increases or job creation. Organisations would likely remain in survival mode for an extended period of time.
Elize Kruger, an independent economist, added that the BTPI had also declined in real times as inflation remained at elevated levels, further eroding the purchasing power of average salaries. In real terms, the average salary was R13 524, declining by a notable 10.4% from a year earlier.
According to the index, despite April’s headline inflation lowering to 6.8% year-on-year and forecasts suggesting prices could moderate at a faster pace in the coming months, the recent depreciation of the rand exchange could throw a spanner in the works if the rand remained at the current weaker levels for a prolonged period.
After two consecutive months of moderate increases in the number of salaries paid into South Africans’ bank accounts, BankservAfrica’s data-adjusted for weekly payments-suggested that more than half of these gains were reversed in April with 123 000 fewer salaries paid.
Kruger said the South African job market was still recovering from heavy job losses incurred from the impact of the Covid-19 pandemic, a challenge amid the low growth reality in South Africa.
Furthermore, South Africa was not only in catch-up mode, but must also accommodate the constant growth in the working age population.
“With little indication of a different economic environment in 2023, but an even lower economic growth forecast for 2023 compared to 2022, the job market-and salary adjustments are likely to remain lacklustre for the remainder of the year. This is a scenario that could only exacerbate the unemployment crisis,” Kruger said.
Meanwhile, average private pensions, measured in the BankservAfrica Payments Pensions Index (BPPI), continued to reflect good growth. “In nominal terms, the average private pension at R10 305 showed a monthly improvement and a 6.4% year-on-year growth,” Naidoo said.
The real average private pension was R9 401 in April, marginally lower compared to a year earlier, but still signalling that the purchasing power of pensioners has been preserved amid the high inflation environment.
Last week, the SA Reserve Bank increased the country's interest rate by 50 basis points, bringing it to 8.25%, the highest level in 14 years.
According to Roelie van Reenen, supply chain executive at Beefmaster Group, this was yet another blow for consumers who were under financial pressure, with ripple effects for all stakeholders, especially against the backdrop of food price inflation having reached double-digit figures, peaking at 14% in March 2023.
“Increasingly consumers have less money to spend. With financial budgets under pressure, they are making significant trade-offs in their shopping choices due to financial constraints. This is impacting the agricultural and beef value chains,” Van Reenen said.
He added that beef prices had declined, but the price reduction had not yet reached the consumer.
The Beefmaster Group said this was because producers were operating under extremely difficult circumstances and the situation was likely to remain challenging for the remainder of the year.
“It is a fact that we have to tighten our belts and brace ourselves for a prolonged period of challenging conditions. I anticipate at least six to eight months of tough times ahead. However, we must remain optimistic and focus on producing cheaper, smarter, and more market-oriented products to protect our industry," Van Reenen said.
Additionally, herd sizes have decreased, and there has been a loss of export markets due to insufficient protection against diseases like FMD, leading to an oversupply of beef in the local market. The energy crisis further complicated the task of aligning production with consumer affordability and demand. Retailer Pick n Pay for example recently announced it has spent R522m in total on diesel and a net amount of R430m when its electricity savings initiatives were taken into account.
The Group said the decline in the value of agricultural commodities, particularly grains, has added to the strain. It said global markets were bordering on experiencing a recessionary period, and this downturn had affected the consumption of grain, with Southern American producers offering discounts just to move their surplus stock.
Van Reenen said the reality against this environment was that agricultural players - farmers, food producers, industry stakeholders - must adapt and produce a cheaper product to cater to price-sensitive consumers. “Failure to do so could have dire consequences for the industry.”
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