September 2018

 

Take-home pay reflects massive increase in August

BankservAfrica's latest index shows increase due to backdated public sector salaried payments and lower inflation

 

The backdated salary payments in the public sector continued to spur the increase in BankservAfrica’s Take-home Pay Index for August. Real salaries showed improvements on both an annual and monthly basis.

According to Shergeran Naidoo, Head: Stakeholder Engagements at BankservAfrica, the average South African take-home salaries increased by 4.7% in real terms on a year-on-year basis.  This represents the largest annual percentage increase in the BankservAfrica dataset since 2012!*

 

“In August, we saw the monthly average real take-home pay reach R14 460 in real terms,” he adds. August’s figure  was 2.7% higher on a seasonally adjusted basis than July. “However, we expect the rate of increase to slow from the current very high rate,” he says.

“The strong increase is largely due to the continued ­delay in government backdated salary adjustments in the preceding months, which were paid in July and August. Delays in municipal and Eskom salary adjustments also contributed to backdated salary payments in August,” explains Mike Schüssler, Chief Economist at Economistscoza. The other reason for the large real average take-home increase was the decline in inflation, which enabled higher real increases. Inflation unexpectantly declined from 5.1% in July to 4.9% in August.

The typical person’s take-home pay (the person in the middle of the earnings distribution) showed an increase of 1.6% after inflation.

According to Schüssler, the rate of take-home pay increase is likely to stay higher than usual as other wage settlements are still expected in the coming months from large sectors with many employees such as mining. Putting August data into perspective, in real terms the real average take-home pay was up by 4.4% since August 2013. Considering that the biggest numbers of employees receiving backdated salaries were from the public sector, this increase may not be evident in other parts of the economy.

Interestingly, the previous record level of take-home pay in November 2017 is 0.5% lower than the new record level set in August 2018.

“One would expect that consumer spending, particularly retail sales, will benefit and remain positive for August and September as the extra take-home pay is likely to aid discretionary spending by consumers,” according to Schüssler. “As such, private consumption expenditure in the third quarter will most likely be substantially higher than the second quarter when employees are still in doubt about the rate of salary adjustments and timing of their actual backdated payments.”

Real average private pensions increased by 4.2%, showing its slowest year-on-year increase, according to Naidoo. However, he adds that the average BankservAfrica Real Private Pension Index (BPPI) showed a 16.1% increase over the last five years. This indicates the average private pensioner has seen better results from their pension increases compared to those with salaries.

The BPPI in real terms is R 6 888, which is 48.4% of what the average salary is.

Pensioners are growing on the South African national payments system as we have reached over 710 000 pension payment to private pensioners (note: private pensioners exclude old age grants and social pension paid). 

For an expanded explanation please see the full report.

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According to Shergeran Naidoo, Head: Stakeholder Engagements at BankservAfrica, the average South African take-home salaries increased by 4.7% in real terms on a year-on-year basis.  This represents the largest annual percentage increase in the BankservAfrica dataset since 2012!*

Graph 2:  Real change in Take-home pay and Private Pensions

Source: BankservAfrica and Economists dotcoza

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Mike Schüssler
Well-known economist Mike Schüssler has partnered with BankservAfrica and analyses our payment information.  Read his report for further commentary:
 

Every day large companies, salary bureaus, remuneration companies, government and data centers send salary data for processing to BankservAfrica. This happens when the transaction occurs between different banks and not within the same bank.

This results in between 4 million and 5.5 million transactions per month, with an average of more than 4.7 million per month over the last year.  Note this number does not reflect the full picture, as some salaries are paid weekly whilst others may be bonus payments. 

The weekly data is adjusted to come up with one figure of what an individual would earn, had they been paid on a monthly basis.  Once this figure was added to those who were paid monthly, it was clear that the BankservAfrica data represented about 3 million people out of a formal work force of about 8.3 million, excluding agriculture, using the Quarterly Employment Survey (QES) from Statistics South Africa as guide.

All social security payments, representing around 3.8 million payments at about R1 000 per month, have been removed from the data set. 

The BDSI is published every second month.