BPPI Index



31 July 2018 


Real-take home takes a fall in June – BankservAfrica 

Delayed public sector salary adjustments takes a toll on June’s real-take home pay

 

Real-take home pay for June experienced its largest decline since early 2017 owing to rising inflation and the delay of annual salary adjustments and back-pay in the public sector, the leading employer in South Africa. This is likely to have an impact on the economy with consumer spending expected to take a knock.

 

“In current terms, salaries increased by 2% on a year-on-year basis but the inflationary increase of 4.6% over the same period saw real take-home pay actually decrease by 2.4%. This is the largest since January 2017,” says Shergeran Naidoo, Head: Stakeholder Engagements at BankservAfrica.  “This means that consumers will not have as much money to spend as they had in the year prior. And this will have a knock-on effect as the costs of the VAT increase and rising fuel prices bite into their budgets.

Naidoo adds that the average take-home pay for the formal South African employed adult paid via the national payment system of South Africa was R14 302 in June in real terms and R13 593 in nominal terms.

“The real-take home pay collapse in June is due to the three month delay in annual salary adjustments of the public sector,” says Mike Schüssler, Chief Economist at Economistscoza. He further explains that the public sector wage increases backdated to April were only paid in July, impacting the level of real take-home pay.  The public sector makes up about 30% of the BankservAfrica Take-home Pay Index.

 

“Therefore, it is likely that consumer spending will fare better in July when government, being the largest employer in South Africa, makes these back payments,” says Schüssler.

 

The BankservAfrica Private Pension Index for June showed the real average pension paid into bank accounts increased to R7 008.  “This is the first time that real private pensions increased above R7 000 per month. The increase of real pensions currently stands at 5.5%,” says Naidoo.

In real terms, the average pension increased to R7 668 for the month of June. The boost in nominal terms was 10.2% or more than twice the inflation rate.

According to Schüssler, one of the most interesting trends in the last five years has been private pension increases, which rose above the rate of inflation. While pensioners are certainly not as well off as those earning a salary, they have seen their pensions increase above the rate of inflation on a constant basis.

“This is at a time where equity prices have not increased after taking inflation into account, indicating pension assets have been invested more in yield producing investments or that pension drawdowns are increasing,” says Schüssler.

Nonetheless, total banked private pensions in the BankservAfrica data increased from 9.6% of total take-home pay banked to 11.4%, says Naidoo.  This as pensioners are fewer in numbers than those in the workforce and receive only about half of the income of employed people.

“Pension data is positive on every measurable way and indicates pensioners are able to play a more important role in the economy. This is evident in the continuing rise in consumer spending such as retail,” ends Schüssler

For full details refer to the report.



“The real-take home pay collapse in June is due to the three month delay in annual salary adjustments of the public sector,” says Mike Schüssler, Chief Economist at Economistscoza. 

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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:
 

Africa’s largest automated payments clearing house, BankservAfrica, launched its BankservAfrica Private Pension Index (BPPI), the first private pension data series in South Africa and one of the few available in the world today. The index provides an income gauge of monthly private pension payments paid into bank accounts of those 60 years of age and over – the fastest growing age group in the country.

Although the majority of people over 60 years of age receive government grants, it can be concluded that by value the largest amount of income in this group would be from private pensions.

“Despite having the sixth highest pension assets to GDP ratio in the world in 2012, very little is currently known about how much South African private pensioners get paid in monthly income,” says Dr Caroline Belrose, Head of Fraud and Data Analytics at BankservAfrica.