BankservAfrica Disposable Salary Index reveals good news for retail sector

South Africa’s retail sector is getting a spring bonus, as both disposable salaries and the number of people taking home more than R10 000 every month have seen a massive increase. This is according to the latest BankservAfrica Disposable Salary Index (BDSI).

The spike in the amount of cash that consumers have in their pockets may, in turn, also help third-quarter growth.

Mike Schüssler, chief economist for economists.co.za explains that the BDSI has not shown double digit increases since April 2012, and the current increase is the highest since September 2010. While inflation was very high in July at 6.3%, the fact is that even after allowing for consumer price increases, the average salary increased way above inflation. The average take-home pay increased to R10 924 per month.

“This means that for the first time in 11 months, average real disposable salaries are showing positive growth on a year-on-year basis. The real increase in disposable salaries is, therefore, 4.7% in July 2013 – the highest of such level in nearly two years,” he says.

Good news for retail

Schüssler expects the huge nominal salary increases to decline again – but not before giving the economy a short-term boost.

“The economy may benefit for a short period from this temporary spike. We expect that there will be another big increase in consumer spending in the next month or so which may actually assist third-quarter growth.

“However, the BDSI figures also show just how weak the South African economy was in the third quarter of 2012, as both the delay in salary increases and the strikes had major effects on the overall consumer behaviour.”

The numbers in perspective

Schüssler also cautioned against too much optimism, as this positive news is partly a timing issue.

“For the June and July figures some caution is needed when looking at the percentage increases, as some increases are actually higher than would be the case under normal conditions.

“It is important to keep in mind that salary increases were paid to public service members very late in 2012. This resulted in the fact that the current numbers actually reflect two years’ worth of increases for them, artificially increasing growth at this point. In other words, the current figures may be a temporary blip that will fade away after August payments. In all likelihood, we will only see a more realistic picture in the September data.”

However, according to Schüssler, not all of the BDSI increase seems to be from last year’s delay in salary implementation.

There seems to be a slight decrease in the number of employees paid. At the same time, the overall total salary bill over the last three months increased by 12.2%. This is confirmed by the 16.9% increase in personal income tax collected by SARS in June 2013, compared to a year ago.

“This certainly shows that overall salary levels and tax collections from individuals are rising rapidly,” says Schüssler.

More people earn upward of R10 000 per month

CEO for regulated products at BankservAfrica Brad Gillis says South Africa’s median disposable salary has increased for the first time to over R8 000 per month.

Gillis says that although this, too, may be a temporary phenomenon it does, however, show that the number of people in formal sector employment with take-home salaries of over R10 000 per month is increasing. Interestingly enough, July 2013 was the first month in the history of the BDSI during which 40% of all disposable salaries captured on the BankservAfrica system were over R10 000.

“This means that after tax, medical aid, pensions and other deductions, 40% of the formal workforce who are paid electronically via the South African payments system now get at least R10 000 in their bank account,” Gillis explains.

With many sectors still bargaining over their wage settlements, it is likely that the number of employees who earn a disposable salary of over R10 000 per month (paid electronically into their bank accounts) may increase in the next couple of months.

Average disposable pensions

Disposable pensions increased with about 12% on a year ago and currently stand at R5 024 per month, which is still less than 50% of average disposable salaries.