Even though people’s salaries in South Africa are increasing on average, data from the BankservAfrica Take-home Pay Index (BTPI) indicate that the increases are being outpaced by inflation.
While this suggests that, in real terms, South African residents are getting poorer over time, the findings of the BTPI are at odds with the official figures from Stats SA.
Stats SA publishes Quarterly Employment Statistics (QES), which tracks the total number of people employed in South Africa’s formal non-agricultural business sector along with their total earnings.
It also tracks the Consumer Price Index in South Africa, with average inflation pegged at below 5% in 2018 and 2019.
After adjusting Stats SA’s quarterly salary data for inflation, the resulting chart shows that although salary growth is slowing, the average salary in South Africa’s formal non-agricultural business sector is still trending upwards in real terms.
When South Africa’s official inflation figures are applied to the Bankserv Africa Take-home Pay Index, however, it shows that people’s real average monthly salaries are on a downward trend.
To get an alternative perspective from Stats SA’s official figures, MyBroadband attempted to collate all of the available BTPI data, which dates back to 2011.
However, it became apparent that as the index has been refined over the years, Bankserv Africa’s previously published salary data is no longer comparable to its latest take-home pay reports.
MyBroadband contacted BankservAfrica and Economists.co.za and requested a copy of its recalculated take-home pay index. The chart below is based on this updated data.
Salaries in South Africa vs inflation — Stats SA Quarterly Employment Statistics: 2009–2020
The official inflation rate of South Africa is calculated based on the price of consumer goods in December 2016.
Salaries in South Africa vs inflation — Bankserv Africa Take-home Pay Index (BTPI): 2012–2020
According to BankservAfrica, its Take-home Pay Index is a reflection of the average monthly salary in South Africa, as well its movements on a monthly, quarterly, and annual basis.
“This is based on all take-home salaries paid into employee accounts via the National Payment System for processing by BankservAfrica,” it explained.
The BTPI is calculated on a three-month moving average.
BankservAfrica noted that the BTPI has been revised due to a change in the South African National Payment System, which started to exclude salary payments from other SACU member countries in the Common Monetary Area (CMA) from June 2018 onwards.
“Under the request by the South African Reserve Bank, the CMA payments were removed and we needed to align this to the BTPI data set. This means the historical data that included these countries were removed and adjusted,” Bankserv stated.
This took place over more than a month and, as a result, the June – September 2018 BTPI numbers are lower and have influenced the average pay for that period and the year after if you look at the BTPI annual increases.
Bankserv said that it has undertaken a review of the massive decline in average wages between July 2019 and August 2019, which could also be partly due to smaller extra payments from the May election.
For these reasons, the September 2018 to September 2019 data is also under review.
Momentum/Unisa Household Wealth Index
Another measure which suggests that South African residents are getting poorer is the Momentum/Unisa Household Wealth Index.
Where the BTPI measures income, the Household Wealth Index measures looks at the inflation-adjusted value of a household’s assets, minus its inflation-adjusted debt.
Momentum/Unisa estimates that the real value (expressed in 2010 prices) of South African households’ net wealth decreased by R828.2 billion between the fourth quarter of 2019 and the first quarter of 2020.
“This estimated real quarterly decline is 52.5% more than the previous largest estimated quarterly decline of R542.9 billion, which was registered during the Great Recession (Q3 2008),” Momentum and UNISA stated in their most recent report.
“The loss in household real net wealth — from an estimated R7043.6 billion in Q4 2019 to R6215.4 billion in Q1 2020 — can in main be attributed to a sharp decline in the real value of households’ pension funds and other investments.”
The real value of people’s pension funds declined by an estimated R427.6 billion over the quarter, while their other investments declined by R363.9 billion.
Momentum and UNISA offered three reasons for the declines:
- The COVID-19 pandemic
- The subsequent lockdown, which in effect incapacitated the global and South African economy
- South Africa losing its investment grade credit rating