Johannesburg – Pensions have buoyed the economy as real disposable salaries declined for a third consecutive month in August.
BankservAfrica said yesterday that its research had shown the decline in salaries was the fifth this year with employees taking home 2.5 percent less after taking inflation into account.“The low rate of disposable salary increases is contributing to the domestic economy’s poor performance,” it said in its August BankservAfrica disposable salary index (BDSI).
BankservAfrica is Africa’s largest payments automated clearing house, processing billions of payment transactions per year. The BDSI monitors how much cash salaried consumers have at their disposal.
The report said in the second quarter, the final consumption expenditure by households increased by 1 percent year on year, while total domestic expenditure decreased 0.5 percent year on year.
It said while workers received salary increases in nominal terms, the value for these were lower due to the higher inflation, which impacted real wage value.
“While workers received salary increases in nominal terms, the value for these were lower due to the higher inflation, which impacted real wage value. The higher inflation over the last year decreased the value of real wages.”
Inflation averaged 4.6 percent in 2015, which was far lower than the current inflation of 5.9 percent.
BankservAfrica said furthermore, above inflation on medical insurance and real personal income tax contributed to the growing gap between gross and net salaries. It said as tax brackets do not take inflation into account, the upper end of tax brackets reflected no inflationary adjustment. “Therefore, the typical inflation plus salary increases are not effectively beating this year’s inflation.”
The report said other than early last year, when the government, the largest employer, delayed salary adjustments for three months, there were no examples in the recent past of such slow nominal growth in average disposable salaries.
According to the 2016 ECA International Salary Trends Survey, South African companies expected the average salary to increase by 6.9 percent in 2016, but this would be undone thanks to an inflation rate hovering around near 6 percent. The survey said once inflation was taken into account, wages would rise by only 1 percent on average.
BankservAfrica said its BDSI was at risk of showing a real decline in salaries for the entire year, should the current trend hold. It said for the first eight months, real take-home salaries declined 0.4 percent.
BankservAfrica said, on the other hand, the real private pension payments for 650 000 pensioner measured in its BankservAfrica private pension payments (BPPI) increased by 1.7 for the first eight months this year compared with the same period in 2015.
“Pension payments increased by 3.5 percent in real terms and by 9.7 percent in nominal terms. The median private pension showed the fastest growth since the BPPI’s inception, increasing by 14.3 percent on a year-on-year basis. The typical pensioner has, therefore, had a relatively good increase in pension payments, which could also be a function of the weaker rand.”
It said while household consumption expenditure was still slightly positive, the domestic economy was being kept alive by the increases that pensioners were getting rather than the salaries.