Latest news with #BankservAfrica
The Citizen
28-05-2025
- Business
- The Citizen
Salaries decreased by 2% in April, but higher than a year ago
If you feel that your wallet was a bit emptier in April than the month before, you are not alone. Salaries did decrease in April. Salaries decreased by 2% in April compared to March, but are still higher than a year ago, as take-home pay slowed again. Mounting pressure on salaries also puts this week's interest rate decision in the spotlight, raising hope for relief among salary earners. According to the Bankservafrica Take-home Pay Index (btpi), the average nominal take-home pay recorded a second consecutive month of moderation in April. The Index reflects data from approximately 3.8 million salary earners. 'The nominal average take-home pay declined to R17 495 in April 2025, down 2.0% from R17 846 in March. 'Despite this deceleration, levels remain significantly higher than the R15 370 recorded a year ago,' Shergeran Naidoo, BankservAfrica's head of stakeholder engagements, says. He points out that the upward trend in take-home pay from the middle of last year marks a positive development after years of sluggish growth and salaries lagging behind inflation. However, he says, the escalating global trade war has dampened sentiment worldwide, affecting confidence in South Africa and slowing economic activity as investors and households pull back on their spending. ALSO READ: Here's what some of South Africa's SOE bosses earn Economic forecasts not great, affecting salaries too Elize Kruger, an independent economist, says although the worst-case scenario for the trade war impact seems to have been averted, economic growth forecasts were trimmed notably for the global economy, while local growth prospects are also expected to disappoint. 'This could hurt employment and earnings prospects of salary earners in South Africa in the coming months.' Real take-home pay, adjusted for inflation, also moderated by 2.2% to R15 005 in April 2025, compared to R15 344 in March, but is still notably higher than a year ago. 'The significant moderation in consumer inflation during 2024 had a positive effect on the buying power of salary earners and the scenario is continuing into 2025, with the latest headline inflation figure at only 2.8% for April 2025,' she says. With headline CPI now forecast to average to be around 3.4% in 2025 compared to 4.4% in 2024, it will be the lowest annual rate since the 3.3% recorded in 2020. The recent increase in the rand exchange rate, combined with a lower international oil price will result in further fuel price declines in June despite the increase in the fuel levy, while the sluggishness in the economy keeps demand-driven pricing pressures well contained. ALSO READ: Capitec CEO tops banking pay charts — but how do staff salaries compare? A look at how SA's top five banks pay 2025 expected to be a good year for salaries 'With this favourable inflation scenario, 2025 will likely be the second consecutive year of positive real take-home pay growth, supporting demand in the economy,' Kruger says. However, with the elevated cost of living, additional taxes announced in Budget 2025, with no adjustment to tax brackets and an inflation-related fuel levy increase, as well as continuing high interest rates, salary earners remain under pressure. Early indications are that the real gross domestic product (GDP) growth rate for the first quarter of the year will likely be zero, or even negative. With the current repo rate at 7.5%, the real repo rate stands at 4.1%, which is a very restrictive stance if the neutral real repo rate of 2.8% is considered, Kruger says. 'A decrease in the cost of credit could go a long way to offer relief to households and the business sector, boosting confidence levels somewhat, while also lowering the hurdle rate on capital expenditure programmes. 'While a more aggressive cut would have been welcomed, the South African Reserve Bank (Sarb) is likely to cut interest rates by only 25 basis points at best at its Monetary Policy Committee meeting on Thursday.' ALSO READ: Increase in take-home pay in January shows positive start to 2025 Slightly higher salaries not enough – we need repo rate cut With the economy stalling in the first quarter and global pressures mounting, accelerating structural reforms is now critical. Tackling energy, logistics and governance challenges will help to unlock growth and buffer against external shocks. 'The current low inflation environment, supported by lower international oil prices and the rand's notable recovery in recent weeks, provides an opportunity for monetary policy to play a role in offsetting some of the pain inflicted on the economy by recent global developments, as many developing and developed economies have already done,' Kruger says. 'While the debate about lowering the inflation target band is ongoing, it should not prolong the pain inflicted on the economy by exceptionally high interest rates.'
IOL News
28-05-2025
- Business
- IOL News
South Africa's take-home pay growth slows as interest rate decision sooms
Average take-home pay in South Africa decelerated for the second consecutive month in April, intensifying focus on the interest rate decision by the SA Reserve Bank scheduled for Thursday. Average take-home pay in South Africa decelerated for the second consecutive month in April, intensifying focus on the interest rate decision by the SA Reserve Bank (SARB) scheduled for Thursday. The BankservAfrica Take-home Pay Index (BTPI), tracking salaries of approximately 3.8 million workers, reported a nominal average take-home pay of R17 495 in April, down 2.0% from R17 846 in March. Despite this slowdown, pay remains 13.8% higher than the R15 370 recorded a year ago. Shergeran Naidoo, BankservAfrica's head of Stakeholder Engagements, noted that while take-home pay has seen gains since mid-2024, recent global and domestic economic pressures are dampening momentum. 'The upward trend in salaries marked a positive shift after years of stagnation, but escalating global trade tensions are weighing on confidence, slowing economic activity,' Naidoo said. Real take-home pay, adjusted for inflation, also declined by 2.2% to R15 005 in April from R15 344 in March, though it remains above year-ago levels. Independent economist Elize Kruger noted that South Africa's consumer inflation, which dropped to 2.8% in April 2025, has bolstered purchasing power. 'With headline CPI projected to average 3.4% in 2025, down from 4.4% in 2024, we're seeing the lowest inflation since 2020's 3.3%,' Kruger said. She attributed this to a stronger Rand and falling international oil prices, which are expected to drive further fuel price cuts in June despite a recent fuel levy hike. However, economic challenges persist. Early data suggest South Africa's quarterly 2025 real gross domestic product growth may be flat or negative, reflecting global trade war impacts and subdued domestic demand. The repo rate, currently at 7.5%, translates to a real repo rate of 4.1% - well above the neutral rate of 2.8%. This restrictive monetary stance, combined with unchanged tax brackets and new levies from the 2025 National Budget, continues to squeeze households. Kruger said a modest 25 basis-point rate cut at the upcoming SARB Monetary Policy Committee meeting could provide relief. 'Lowering borrowing costs would ease pressure on households and businesses, potentially boosting confidence and investment,' she said. However, she cautioned that a more aggressive cut is unlikely given the SARB's cautious approach. Global trade disruptions and sluggish local growth have trimmed economic forecasts, raising concerns about job and income prospects. Kruger stressed the need for structural reforms to address energy, logistics, and governance bottlenecks. 'These reforms are critical to unlocking growth and shielding the economy from external shocks,' she said. The low inflation environment, supported by a recovering Rand and cheaper oil, offers the SARB room to ease monetary policy, following the lead of other developed and developing economies. Yet, debates over lowering the inflation target band could delay relief. 'Prolonged high interest rates are punishing the economy unnecessarily,' Kruger warned. As South Africans await the SARB's decision, the slowdown in take-home pay underscores the delicate balance between fostering growth and managing inflation. With global uncertainties looming, the central bank's next steps will be pivotal for salary earners hoping for financial respite. BUSINESS REPORT Visit:
The Citizen
14-05-2025
- Business
- The Citizen
Economic activity slows in April as economy struggles
Although the South African economy is muddling along, there is some hope thanks to low inflation, low fuel prices and a strong rand. Economic activity has slowed in April as the economy struggles with downside risks, such as the United States' (US) punitive import tariffs, plummeting markets and sharply lower forecasts for global economic growth. According to the BankservAfrica Economic Transactions Index (BETI), that measures the value of all electronic transactions cleared through BankservAfrica on a monthly basis at seasonally adjusted real prices, economic activity slipped in April. 'The BETI reached its lowest level of the year of 136.4 in April, down by 0.6% on the 137.2 recorded in March,' Shergeran Naidoo, BankservAfrica's head of stakeholder engagements, says. Although the BETI is still 1.5% higher than a year ago, the slowdown reflects the impact of April's announcement of U.S. punitive import tariffs, which marked the beginning of a developing trade war leading to daily volatility, plummeting markets and slashed global growth forecasts. Elize Kruger, an independent economist, says confidence levels across the globe and in South Africa have been knocked by the sheer uncertainty that these developments brought on. 'Low confidence and uncertainty are detrimental to economic activity, as investors and households hold back on spending decisions until there is more clarity.' ALSO READ: Economic activity in SA struggling to gain momentum Good news for local economy despite global setbacks However, despite global setbacks, positive factors are expected to support economic activity in 2025, she says. 'While the overall effect of global developments is negative for the South African economy, prompting a downward revision of 2025 growth forecasts by around 0.5 percentage points, several offsetting factors are offering some relief. 'The global downturn is expected to dampen commodity demand and prices, but lower international oil prices are easing inflation pressures, and rising gold prices may help counter export losses. Many South African export commodities also remain exempt from US tariffs, providing potential support for the mining sector and broader economy.' Kruger points out that other economic indicators were mixed in April, sending conflicting signals about the strength of the economy. The S&P Global South Africa Purchasing Managers' Index rose to 50.0 in April, increasing from 48.3 in March, after four months in negative territory. ALSO READ: SA's economic growth outlook growing increasingly dim Manufacturing is struggling, but car sales are recovering Meanwhile, the seasonally adjusted Absa Purchasing Managers' Index (PMI) remained in contractionary territory for a sixth consecutive month. Data from Statistics SA also recently confirmed that the manufacturing sector has entered a technical recession with two consecutive quarterly contractions. However, encouragingly, Naamsa figures revealed that the strong performance in the vehicle sales market continued in April 2025. 'All indicators point to the likelihood that, after several false starts, full-year vehicle sales in 2025 will finally return to pre-Covid levels, reflecting an improvement in household budgets due to lower inflation and interest rates,' Kruger says. ALSO READ: Increased unemployment rate red flag for weak economic growth Pockets of excellence in local economy will help economic activity 'With some pockets of excellence in the South African economy, such as in the renewable energy, automotive and financial sectors and positive developments relating to the de-escalation of the global trade war in recent days, such as the trade deals between the US and UK and China, the South African economy can regain momentum in the second half of the year.' Kruger says the launch of the second phase of Operation Vulindlela is also a positive development, confirming government's commitment to push forward on much-needed structural reforms. After reaching an all-time high in March, the number of transactions cleared through BankservAfrica in April 2025 subsided to 167.9 million compared to 172.4 million in March, but it was still 7% up on a year ago. The standardised nominal value of transactions eased off to R1.320 trillion in April compared to R1.365 trillion in March 2025, with the average value per transaction tracked in the BETI continuing on its downward trend to R7 482. ALSO READ: Trump tariffs created unprecedented uncertainty — trade expert Structural tailwinds will push up economic activity Kruger says some structural tailwinds should continue to push economic activity higher on the local front in 2025 despite global developments. With inflation currently at 2.7%, below the South African Reserve Bank (Sarb) 3-6% target band, there is significant room to cut interest rates from the current repo rate level of 7.5% by at least 50 basis points. 'Real interest rates are simply unnecessarily punitive for an economy muddling along, unable to gain meaningful momentum,' she says. At 4.3%, the average real repo rate remains highly restrictive, especially when compared to the neutral level of 2.7%. Meanwhile, the rand has regained nearly all its post-US Liberation Day losses, helped by some weakness in the US dollar and is trading at fairly strong levels, Kruger says. 'The low inflation rate will also play a key role in supporting the recovery of salary earners' purchasing power. With average salary increases expected to be between 5% and 6%, 2025 will be the second consecutive year of real salary increases, which should boost consumer spending.'
The Citizen
25-04-2025
- Business
- The Citizen
Decrease in take-home pay reflection of mounting economic pressure
The outlook for take-home pay for the future is not that great as global and local political uncertainty start to affect employers. The decrease in take-home pay in March reflects the mounting economic pressure not only on South Africa but also on the rest of the world, with local growth prospects weighing on confidence. There is concern that this could negatively affect employment and earnings. According to BankservAfrica, the average nominal take-home pay slipped in March as intensifying local and global economic headwinds continue to pressure growth prospects and confidence levels, raising concerns over potential impacts on employment and earnings in the coming months. Shergeran Naidoo, head of stakeholder engagements at BankservAfrica, says the average take-home pay declined to R17 811 in March, 2.5% lower compared to February's R18 272, but still notably above the level of R15 983 a year earlier, reflecting the improving economic environment. However, he says, this outlook will likely shift as escalating trade tensions and growing political uncertainty are expected to affect the economy and salary earners in the near term. Real take-home pay, adjusted for inflation, also moderated by 2.9% to R15 343 in March compared to R15 793 in February, still a notable 8.1% up on year-ago levels. Nominal take-home pay is the amount employers pay employees for their work and is not adjusted for inflation, while real take-home pay is a wage adjusted for inflation. ALSO READ: What does lowest inflation in 5 years mean for repo rate? The influence of inflation on take-home pay Elize Kruger, an independent economist, says the significant moderation in consumer inflation during 2024 had a notable positive impact on the purchasing power of salary earners. 'This trend has carried into 2025, with headline inflation easing to just 2.7% in March, the lowest level since June 2020.' Headline inflation is now forecast to average at around 3.4% in 2025 compared to 4.4% in 2024, reaching the lowest annual rate since the 3.3.% recorded in 2020. She says while the rand exchange rate weakened sharply amid the escalating trade war and resultant global risk-off sentiment, it has since recovered much of its losses, partly due to the US dollar's depreciation and could, in combination with the lower international oil price, actually be deflationary over the short term. 'On the assumption that inflation will remain well-contained, 2025 will likely be the second consecutive year of positive real take-home pay growth, supporting demand in the economy. This relief is much needed, as salary earners remain under strain from the high cost of living, persistently elevated interest rates and additional tax burdens because the tax brackets were not adjusted in Budget 2025.' ALSO READ: Here is how the non-adjustment of personal income tax will hurt the working class Withdrawal of VAT increase will lift consumer confidence somewhat However, she says, the decision by the finance ministry to withdraw the proposed VAT increase will come as welcome relief to already financially strained South Africans and will probably lift confidence levels somewhat. Kruger points out that the combined effect of escalating global trade tensions and domestic political uncertainty has sharply dented consumer confidence in the first quarter. 'Salary earners may become more cautious with their spending, despite having greater purchasing power. This shift is already reflected in the recent moderation of real retail sales.' While the direct impact of the punitive import tariffs imposed by US President Donald Trump on South Africa is limited to around 8% of total exports, some sectors will feel the impact more severely, particularly those that enjoyed duty-free access to US markets under the African Growth and Opportunity Act (Agoa), she says. 'In those sectors, including automotive, manufacturing and agriculture, the anticipated negative impact on businesses is likely to filter through to the workforce in the form of constrained opportunities and earnings pressure.' ALSO READ: IMF's bad news about economic growth for SA, thanks to Trump tariffs Impact on take-home pay bigger from effect of trade war on trading partners However, Kruger says, the bigger negative impact on South Africa will likely emerge from the indirect effect of the trade war on the global economy at large and specifically on its major trading partners. The International Monetary Fund (IMF) this week revised South Africa's expected growth rate down to just 1% for this year, matching the view of Carpe Diem Research Services, which projects a rise to only 1.3% in 2026. 'It forecasts global growth of just 2.8% this year, down from 3.3% in 2024 and well below its 3.7% long-term average. The IMF has trimmed its global and South African growth forecasts by 0.5% compared to its January forecasts. 'However, its outlook for the US took an even bigger hit, slashed by 0.9% to just 1.8% for 2025. Although global growth remained well above recession levels, all regions were negatively affected, and the IMF indicated that the risk of a global recession had increased to 30%, from 17% in October 2024.' Kruger says while uncertainty remains exceptionally high, the current low inflation environment, supported by lower international oil prices and the rand's recovery, offers an opportunity for monetary policy to play a role in offsetting some of the economic impact of recent global shocks. 'Given that real interest rates remain unusually high for an economy stuck in a low-growth cycle, the South African Reserve Bank could lower interest rates further without compromising its mandate to keep inflation within the 3-6% target range.'
IOL News
25-04-2025
- Business
- IOL News
South Africa's average nominal pay dips as economic challenges loom
As real take-home pay, adjusted for inflation, also softened by 2.9% to R15 343, the challenges faced by salary earners in March are palpable—though notably, this figure still reflects an 8.1% increase over the previous year. South Africa's economic landscape is experiencing a nuanced shift, with BankservAfrica revealing that the average nominal take-home pay declined in March 2025. The figure slipped to R17 811 from February's R18 272, marking a 2.5% decrease. Despite this dip, when compared to R15 983 just a year ago, the average remains buoyed above last year's levels—highlighting both resilience and the effects of ongoing economic pressures. Shergeran Naidoo, head of stakeholder engagements at BankservAfrica, addressed the declining nominal pay, attributing it to intensifying economic headwinds that are impacting growth and consumer confidence. "This raises concerns over potential impacts on employment and earnings in the coming months. However, Thursday's announcement to scrap the proposed VAT increase offers some reprieve," Naidoo said. Elize Kruger, an independent economist affiliated with BankservAfrica, noted a tempered outlook moving forward, referencing both escalating trade tensions and growing political uncertainty as significant factors likely to affect consumer sentiment and, ultimately, the economy. As real take-home pay, adjusted for inflation, also softened by 2.9% to R15 343, the challenges faced by salary earners in March are palpable—though notably, this figure still reflects an 8.1% increase over the previous year. 2024 saw a significant moderation in consumer inflation, allowing salary earners a respite in their purchasing power. With the Consumer Price Index (CPI) dipping to a mere 2.7% in March—its lowest levels since June 2020—the outlook for 2025 appears cautiously optimistic. Kruger anticipated that if inflation remains under control, the current pattern of positive real take-home pay growth could persist, bolstering demand for goods and services in the economy. "This relief is much needed, as salary earners remain under strain from the high cost of living, persistently elevated interest rates, and additional tax burdens stemming from the unchanged tax brackets in the 2025 National Budget," added Kruger. The withdrawal of the proposed VAT hike by the Ministry of Finance has been described as a welcome development for consumers already faced with financial strains. On a broader scale, the effects of global economic instability, exacerbated by trade conflicts—particularly those instigated by US tariffs—are anticipated to ripple through the South African economy. Although the direct impact on total exports is limited, sectors reliant on duty-free access to US markets, such as automotive and agriculture, may face significant challenges, subsequently affecting employment and earnings stability. Efficient Dawie Roodt, chief economist at the Efficient Group, said that take-home pay was determined by how well the economy is doing. 'Currently the South African economy is not doing well. Estimates for the economic growth are being adjusted downwards and yesterday the IMF also reduced estimates for the rest of the year. If the economy grows, the take-home pay will increase as well,' Roodt said. Waldo Krugell, an economics professor at the North-West University, said that in terms of the year-on-year improvements, in real terms, it was good news for consumers and speaks to the importance of low and stable inflation. 'I can see how those uncertainties can weigh on consumer confidence, particularly when it comes to buying durable goods.' BUSINESS REPORT
