Fall in disposable pay may be ‘new normal’
After-inflation salaries decline for eighth month in a row
AVERAGE real disposable salaries in South Africa declined for the eighth consecutive month year on year for the first time since a salaries index began in 2013.
The disposable salary index (BDSI) and BankservAfrica’s private pensions index (BPPI) for January, released yesterday, showed that single-digit growth in disposable salaries may be the “new normal”.
Caroline Belrose, the head of information services at BankservAfrica, said: “For the first time since the BDSI began in 2013, average real disposable salaries declined for eight consecutive months on a year-onyear basis.”
However, BankservAfrica said total salary payouts did not decrease in real terms.
BankservAfrica said there were 177 000 additional small pay-cheques in the system, mostly for part-time and weekly paid temps, which contributed to keeping the movement of salaries static in real terms.
The institution said that, in nominal terms, average salaries increased by 3.9 percent in January – below the increase in the cost of living.
The average nominal disposable salary for January was R13 752, according to the financial institution.
However, salary declines in real terms of 2.6 percent represented the biggest fall over the past year.
The BDSI and the BPPI are gauges of the money paid into bank accounts from pension schemes and salaries.
Rapid decline Mike Schussler, the chief economist at Economics dotco. za, which compiled both surveys, said: “It is unlikely that consumer sentiment will recover soon, with real salaries declining rapidly for this length of time. Retail sales will remain under pressure, and consumers will think twice before taking any new debt or making any durable purchases.”
Last month, a survey found that consumer confidence slipped deeper into negative territory in the fourth quarter of last year, highlighting households’ concerns about the weak outlook for the economy. The index slumped to -10 after registering -3 in the third quarter.
BankservAfrica said disposable salaries reached a high in October 2015 in real terms because of the slight increase in the number of individuals on the payment system.
‘It is unlikely that consumer sentiment will recover soon, with real salaries declining rapidly for this length of time.’
It said this could also be attributed to the increase in the number of part-time jobs.
“Nonetheless, the average take-home salary is constrained, as observed in retail, domestic tourism and vehicle sales, as well as for telecommunications services. All of these sectors combined reflect slower consumer spending,” BankservAfrica said.
“Clearly, the heady days of 2011 and 2012 are now over, and the ‘new normal’ seems to be for very long single-digit growth in disposable salaries.”
BankservAfrica said a similar reality was reflected in the BPPI for January, although for different reasons.
It said the BPPI reflected a second consecutive month of annual declines in real terms.
“Besides the effects of the equity markets, the strengthened rand has also resulted in foreign investment incomes being lower than before in real local terms to pension funds, which are being replaced in so-called rand hedge stocks,” Belrose said.
“The BPPI showed a decline of 1.1 percent – the biggest drop for pensioners since BankservAfrica data began just over four years ago in 2013. However, aggregate pension payments increased in real terms by 6.5 percent for the last three months on a year-onyear basis.”