In a five-year review of take-home pay, BankservAfrica found that the average salary has not kept pace with inflation. (Illustration: Getty Images)
The past five years have been the worst for nominal compensation growth in South Africa since 2000, with average salaries having fallen in real terms, according to a new report by BankservAfrica.
In its five-year review of take-home pay, the clearing house found that the average salary has not kept pace with inflation, growing 22.8% from February 2018 to February 2023. This is compared to the 26.6% increase in the consumer price index over that period.
Salaries have weakened as the country grapples with the effects of a failing economy, ultra-high unemployment and soaring inflation — all made worse in the wake of the Covid-19 pandemic.
According to the report, nominal take-home pay did keep up with inflation from 2018 to 2021. But, in 2022, finances took a turn for the worse as the nominal average salaries stagnated, falling behind the rising cost of living.
During the first half of 2022, inflation edged above the limit of the South African Reserve Bank’s 3% to 6% target range before peaking at 7.8% year-on-year in July.
Despite being seen as having peaked, inflation has remained sticky since and has yet to be brought within the central bank’s target range. In March, the yearly inflation rate still stood at an uncomfortably high 7.1%.
“It has been a pretty dismal story over the past five years,” independent economist Elize Kruger said, commenting on the review’s findings.
Since the 2007 global financial crisis, South Africa’s economic growth has underperformed compared with the world and the country’s emerging market peers, Kruger noted.
The country’s economy, she added, has muddled along in the wake of the pandemic. South Africa’s GDP only just recovered to its pre-pandemic level in the third quarter of 2022 before it dipped again the next quarter.
Meanwhile, the number of salaries paid increased by only 455 140 over the past five years, reflecting the country’s poor record for job creation.
Data released this week revealed that South Africa’s unemployment rate rose to 32.9% in the first quarter of 2023. A deeper look into Statistics South Africa’s quarterly labour force survey shows that the number of employed workers is still lower than it was prior to the pandemic. In the first quarter of 2020, there were close to 16.4 million employed people. There were 16.2 million employed people in the first quarter of 2023.
The economic conditions have been exceptionally tough on businesses, Kruger said, noting that companies have gone into “survival mode” — redirecting capital earmarked for investment towards measures to deal with load-shedding.
“The economy is even weaker now than it was last year and the previous five years on average,” Kruger said in her forecast for the economy. “So we can hardly expect that we will see a buoyant employment market or high salary increases in this type of economic environment.”
She said nominal take-home pay will probably continue to lag inflation, until prices are pushed notably lower.
