BPPI Index



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 full details refer to the report.



“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.

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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.