Take-home pay bounces back 

BankservAfrica’s latest data shows salaried workers feel slight pressure alleviation but potential inflation increases loom.

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Average take-home pay bounced back in October after a decline in September while pensions reached a new high in October. The BankservAfrica Disposable Salary Index (BDSI) – a measure of real take-home pay – indicates pay cheques to the formal sector employees in South Africa increased by 0.5% after inflation in October. This follows from the 1.3% decline in September on a year-on-year basis. These indicate the September slump was likely just a deviation from the increasing salary trend.

“With the South African household debt-to-income ratio declining, along with slightly lower interest rates since July, the South African consumer is recovering slowly as disposable salaries have beat inflation since March this year. September’s decline was probably an anomaly, and the trend of a small increasing real wage should continue, as long as inflation remains around current levels,” says Mike Schüssler, chief economist at Economists dotcoza.

The BDSI real salary was R13 990 for October this year, R16 less than September but R62 more than October. In nominal terms, the BDSI recorded an average of R14 499. Schüssler points out that the looming fuel price shock in December could, however, derail the positive real take-home pay trend, which is currently slightly above inflation. Price shocks from electricity could also have an additional impact.

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Meanwhile, the BankservAfrica Private Pension Index (BPPI) shows that pensions paid increased by 31.3% in September, while the total amount increased by 38.6% before any smoothing and calculations. This significant increase resulted in the total salaries and pension income paid into bank accounts increased by 7.6% instead of the nominal 6.6%.

“The increase is, in part, due to extra payments for Transnet pensioners, which we estimate accounted for about 35 – 40% of the increase. Some other pensioner ‘bonuses’ were also paid into pensioners’ bank accounts further contributing to the unusual increase. The size of the extra payments to pensioners in October this year was a nominal R1.6 billion compared to the same time last year. This represents the biggest extra payment amount since April 2015. In real terms, the value of the total pension pay-out was the highest on record and will probably make a substantial difference to retail sales if it has not already,” Schüssler says.

While the average real pension increased by 1.5% year-on-year, it is important to note that the average pension paid is smoothed and there were no allowances for the extra payments to maintain the integrity of the time series. It does, however, seem that many pensioners had a once-off bonus, meaning that their individual pension doubled for the month.

Real pensions averaged R6 457 for the month and R6 859 in nominal terms. For the first time on record, aggregate pensions were 13.5% of salaries paid, which is unusual as the pensions values paid normally totals about 10.3% of salaries over the last year. However, the average pension, as well as the median pension, have been performing well over the last few years, having consistently outperformed inflation. This indicates that interest rates play an important role in the performance of pension payments.