BPPI Index

January 2019 

SA’s take-home pay was ‘okay’ in 2018

BankservAfrica’s December data gives 12-month view of take-home pay and private pensions

 

Take-home pay in 2018 was neither good or bad however the year did prove the most difficult for salary adjustments in the last five years, according to BankservAfrica’s data. Banked private pensions, however, continued to reflect growth throughout the year.

In December, the average banked real-take home pay was R14 094 showing a 0.5% year-on-year change and a slight improvement from November, according to Shergeran Naidoo, Head: Stakeholder Engagements at BankservAfrica. The nominal value was R15 045 or a 5.5% change on December 2017.

“The worst year for real take-home pay was 2016 where there was a 1.1% decline in take-home pay after inflation while all the other years showed an increase of which 2018 was the smallest. This means that although take-home pay was marginally up in 2018, this was still the most difficult year for salary adjustments in the last five years,” explains Naidoo.

While 2018’s data proved to be jittery, the overall data shows real take-home pay increased by just 0.4% in the South African economy. With inflation averaging 4.6% for 2018, the average employees increase was above the price level changes as measured by the inflation basket. BankservAfrica’s Take-home pay Index tracks about 3 million salary earners every month via about 4 million payments a month paid into the national payments system.

However, towards the year-end, take-home pay declined as inflation shot up as a result of the fuel price increases. But, according to Mike Schüssler, Chief Economist at Economistscoza, the dust settled in December when the actual take-home pay increased slightly. Still, at the current rate, it would take 180 years to double a salary in real terms.

“The BankservAfrica Take-home pay Index had an up and down year as at first and many pay negotiations resulted in delayed increases, which led to an actual decline in real take-home pay,” explains Schüssler. When the increases were finally paid, some back pay take-home pay shot up and was strongly positive for a few months. This was evident in August when public sector back payments took place.

Take-home salaries (after taxes, pensions and in some cases medical expenses) did, however, beat inflation even if only a little. The nominal salary increases of 5% was, however, double the shopping inflation rate as retailers kept price increases low.  However, higher costs for fuel, medical and utility bills pushed up the average inflation rate to 4.6%.

The average real take-home pay for the whole of 2018 was R13 990 per month for the person receiving their salary via a bank account (before inflation, the average was R15 018 per month).

“The weak economy is not helping South Africans get salary increases although the average increase for the year is just above inflation,” says Schüssler. Some salary increases were above 7% which, after tax and inflation would have resulted in an estimated 1.8% increase in real after-inflation terms. “Many private sector firms, however, remain under pressure resulting in less than inflation increases. Many employees are struggling to maintain their standard of living.”

“A total increase of 1% after tax and pension in take-home pay over five years says that in essence, salaries were adjusted just for inflation on average,” explains Schüssler.

Take-home pay did at least result in higher retail sales as retail inflation was just about half the headline inflation rate for 2018.

The BankservAfrica Private Pension Index had another great year in 2018

In December 2018, the average real private pension was R6 855, a 3.5% year-on-year change, according to Naidoo. The nominal average value was R7 374 or an 8.8% change from December 2017.

However, the comparison between 2018 and 2017 shows pensions increased by 4.6%. The average real pension after inflation value was R6 880 per month for 2018 (R7 434 per month was the nominal value).

“The increase in private pensions drawdowns can be owed to asset class performance which did not have a 4.6% return in 2018,” explains Naidoo. “And with an inflation average of 4.6% in 2018, the increase in private pensions was exactly double that of the inflation rate.”

Although pensions did increase faster than take-home pay, they are still less than half of its value.

But the disconnect between the banked take-home pay and private pensions has been very clear over the last five years. With SA’s population growth rate at an estimated 1.7% and 3.4% for the population aged over 65, pensioners are the fastest growing expenditure group in the country.

“It is clear that pensioners are going to become even more important in the South African economy. With pensions growing at almost double the take-home pay rate, and more than double the working age proportion of the population, pensioners will become more important from a retail sales point-of-view,” ends Schüssler.

For full details refer to the report.



The BankservAfrica Take-home pay Index had an up and down year as at first and many pay negotiations resulted in delayed increases, which led to an actual decline in real take-home pay,” explains Schüssler. 

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Mike Schüssler has his sayMarket insights from
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.