Press release: For immediate release
Date: Wednesday, 22 July 2015
Take home salaries increasing at a slower rate
The growth of the average disposable salary in South Africa is 1% after inflation – which is positive real growth thanks to civil servant salary increases and backdated payments in June.
The average BankservAfrica Disposable Salary Index (BDSI) is R12 849 for June - 5.8% higher than a year ago. This compares to civil servant gross salary increases of 6.4% and private sector increases, which averaged about 7% over the last year.
“The BDSI is showing slightly lower increases than gross salary increases due to a number of factors like lower salary increases, higher deductions from personal tax as well as higher medical insurance payments,” says Mike Schüssler, Chief Economist at Economists dotcoza.
Other statistical data shows fewer cases of civil debt judgements meaning there should be fewer garnishee orders deducted from formal sector salaries.
While take home pay is certainly still increasing, it is at a lower rate than a year ago, and therefore the trend overall is slowing.
“The average BankservAfrica Disposable Salary increase in the first six months of 2015 is 6.3% compared to 8.3% for the first six months of 2014 in nominal terms. This slowdown is partly because of a lower inflation rate, as most salary adjustments are linked to the consumer price index,” says Dr Caroline Belrose, Head of Fraud and Data Analytics at BankservAfrica.
These slower nominal increases are expected to continue as lower inflation impacts on wage increases which will ironically lead to low real wage increases as inflation picks up again. Wage increases are also low as they factor on the lower inflation rate. The BDSI trend is expected to continue with low to negative real increases for the next few months.
In contrast to salaries, the average take home private pension has been increasing at a much faster rate. The South African take home pension averaged out at R5 766 per month - an increase of 3.9% in real terms.
Pension payments are believed to be benefitting from higher equity markets and the weaker Rand, as many pension funds have foreign exposure. This could also indicate that while pensions are still under 45% of the disposable salary level, the growth in pensions could become more important to retailers and others if salary growth or employment levels come under pressure.
Overall however, both salaries and pensions increased in real terms in June with slower real increases apparent than the average over the last six months.
Ends Contact Wendy Fourie for more information: WendyF@bankservafrica.com or 011 497 4119.
Notes to the editor:
The BDSI data is smoothed on a three month moving average basis and adjusted for both weekly payments and pension payments. The average pension payments are only about 60% of those of people in employ, so the BDSI focuses on the employed and their salary payouts. We therefore adjusted the monthly numbers to take this into account. The average disposable salary is adjusted on a constant basis for these two factors. December is a very high payout month and somewhat distorts monthly averages, but we believe that the year-on-year trends remain intact.
Similar to the BankservAfrica Disposable Salary Index (BDSI), the Private Pension Index is an income gauge of money paid into bank accounts from pension schemes. While we do not know the exact number of people we do know the exact number of beneficiary accounts and this shows that there are about 633 000 monthly payments (for 2014 on average) going through the BankservAfrica system, which have been identified as pension payments.
This number does change slightly from month to month but out of the known universe of 740 000 private pension payments in 2012, it appears that the BankservAfrica payments system captures over 85% of the pension payment accounts. This indicates that the sample size of private pensions is extremely good via the BankservAfrica payment system.
We do not consider payments over R100 000 in size as these would typically be lump sum pay-outs of the amount that people can take out of their pension. These could also be pay-outs of the remaining pension in an account to family of a deceased. This remaining amount can often average well over R350 000 for each payment and as with the BDSI these payments do tend to distort the averages at certain times of the year. For 2014 these exclusions reduced the number of accounts considered from 633 000 to 628 000.
Payment analysis is conducted from the second of each month to the first of the following month inclusive as payment dates can vary when a month ends on a Sunday. A three month moving average is then calculated for trend analysis.
BankservAfrica is a payment-enabling organisation operating between the various South African banks with a very secure messaging environment in place. Economists dotcoza is an economic consultancy that helped develop the BPPI.