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BankservAfrica index: Christmas relief short-lived – expect a tight 2014

07 March 2014 Brad Gillis, BanservAfrica

Although South African consumers had some financial relief over December as their take-home pay was higher than a year ago, indications are that the increase in disposable income will once again be slower than inflation for the rest of the year. This is according to the latest BankservAfrica Disposable Salary Index (BDSI).

This simply means higher prices, with less money to pay the bills – most certainly unwelcome news, especially for 70% of the workforce who take home less than R12 000 per month.
 
"The BDSI indicates that formal sector workers have had eight months of positive, real increases in take-home pay after four months of decline about a year ago,” says Brad Gillis, CEO regulated products at BankservAfrica.
 
According to Gillis, South African take-home salaries averaged R11 641 in February 2014, which was 6.4% higher than a year ago. However, in real terms, take-home pay increased by only 0.5% in December year-on-year. After being smoothed and adjusted, the BDSI actually declined with R12 between December 2013 and January 2014.
 
"The January 2014 change is the lowest increase in both real and nominal terms in seven months (the period in which salaries going through the BankservAfrica electronic payment system remained higher than inflation), and February remained flat.
 
"It does therefore seem that South Africans with formal sector jobs have, in general, received take-home pay increases above the rate of official inflation, although the rate of real increases is fast declining.
 
"It is quite possible that South African disposable salaries will again dip below the rate of inflation as inflation increases and salary increases decline in nominal terms," Gillis explains.
 
Economy struggling to get going

In December 2013, the average disposable salary payment was an unadjusted R12 834, which was only 2.3% up when compared to December 2012.
 
Mike Schussler, chief economist at economists.co.za, says at least part of the slowdown in increases is probably due to lower bonus payments as the economy struggled to gain traction and sales or production targets were not made.
 
"It is also likely that bonus payments could have been lower or, in some cases, delayed into January.
 
"However, one suspects that the chances of high take-home pay increases are quite slim for 2014, as many people are pointing out that the economy is struggling with capacity constraints and disruptions such as strikes.
 
"It is estimated that the platinum strike decreases the number of monthly payments with close to 50 000 pay cheques per month. According to company information, the losses for platinum workers are now over R3 billion in lost wages – and this is only for the platinum strike!"
 
Who receives what – the salary breakdown

Although payments of over R100 000 and pension payments are not taken into account for the BDSI, it is still interesting to note that, with the exception of December, for the first time more than 11 300 people received payments over R100 000.
 
The median monthly salary remains between R8 000 and R9 000 in January. An estimated 30% of all employees get to take home the average salary amount of R11 923 while about 70% of the workforce takes home even less.
 
Nearly 40% of formal sector disposable salaries are now over R10 000 (39.5%), but these figures are slightly biased towards bigger firms, which generally pay a slightly higher salary than smaller firms.
 
The top 1% of disposable salary payments would start somewhere between R50 000 and R60 000. The top 10% of formal sector employees take home between R20 000 and R25 000, while less than 23% of employees take home more than R14 000.
 
Only 0.2% of all payments were for more than R100 000 and these payments are totally excluded from our average and median.

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