Launch of BankservAfrica Disposable Salary Index brings news of economic challenges
The BankservAfrica Disposable Salary Index (BDSI), launched today in Johannesburg, indicates that consumer spending is likely to face further challenges as disposable income seems unable to keep up with inflation.
The BDSI is the second economic index launched by BankservAfrica, Africa’s largest automated clearing house. The company has been offering insights on the economy through the BankservAfrica Economic Transaction Index (BETI) since March 2012, providing near real-time information on economic growth.
BankservAfrica facilitates electronic salary payments on behalf of the banking sector, and processes more than a third of all salaries paid in South Africa. By giving role players access to these statistics through the BDSI, BankservAfrica can provide a strikingly clear picture of South African consumers’ disposable income and their behaviour.
What the first BankservAfrica Disposable Salary Index is saying
Disposable salaries – income after income tax, UIF and company deductions had been made – grew at their lowest level since September 2005, at only 3.3% year-on-year, compared to 5.1% in May. According to Mike Schüssler, chief economist at economists.co.za, this confirms that the economy is slowing.
“All things considered, South African consumers will be increasingly under pressure as disposable salaries cannot keep up with the rising cost of living.
“The strongest expenditure sector in the economy over the recent past has been the consumer. This growth is likely to slow unless the consumer borrows more – but it is clear that the consumer is not in a borrowing mood.”
The average South African disposable salary
The median monthly disposable salary, when weekly and bi-weekly payments are taken into account, is currently between R8 000 and R9 000. Around 7.6% of salaried individuals earn this amount.
The biggest category, which accounts for about 12.7% of all employees, is the R10 000 to R12 000 bracket.
Only 20% of disposable salaries are above R14 000 per month, while just over 25% of monthly disposable salaries are below R5 000 per month. In June 2012, the average monthly disposable salary was R9 724.
The average formal sector salary before taxes and pension, is estimated to be around R14 000 per month. However, salaries paid by larger companies are likely to be over R15 000 before tax, pension and medical aid deductions.
The BDSI represents an estimated three million salaried employees as of June 2012. Using Quarterly Employment Survey Data from Statistics South Africa, and Schüssler believes that this figure represents about 36% of all formal, non-agricultural employees.
The data has also shown that the average disposable (mainly private) pension was less than half the average disposable salary in June 2012, at R4 018. The BankservAfrica data allows for separation between pure salaries and a broader pension category, which seems to represent about one million people.
“All in all we believe that the data could represent a combined number of up to four million South Africans, although the Disposable Salary Index tracks only about three million people on a ‘pure salary’ basis,” Schüssler explains.
An opportunity to serve the economy
Up-to-date data about such a large section of the country’s workforce can be invaluable to institutions like the South African Reserve Bank, says Brad Gillis, CEO regulated business at BankservAfrica, as it will indicate if demand-side factors are playing a role in price increases.
“The index will also help us better understand household consumption, as this is the largest expenditure category in Gross Domestic Product (GDP). Retailers should be interested to know how much money consumers have available to spend, or to what extent they are accessing loans,” he explains.
“The index highlights the difference between salaries and pensions, which can be very helpful to policy makers and marketers alike.”