Salaries in South Africa surpass expectations with strong January growth
According to BankservAfrica's Take-home Pay Index (BTPI)—which tracks the average nominal take-home pay of approximately 4 million salary earners—the average take-home salary surged to R18,098 in January 2025, marking a significant rise from R17,246 in December 2024 and R15,564 a year earlier.
'The upward trend in take-home pay signals positive developments in the earnings landscape,' says Shergeran Naidoo, BankservAfrica's head of Stakeholder Engagements. This growth suggests improved economic conditions, wage adjustments, or sectoral shifts benefiting employees across industries."
The upward trend in average salaries started early in 2024, and despite some monthly volatility, nominal take-home pay continues to tick higher.
'This positive remuneration trend evident in the BankservAfrica sample reflects a generally improved business environment, notable moderation in inflation, higher confidence levels in the economy, and three interest rate cuts that have provided much-needed relief,' says Elize Kruger, independent economist.
Company profitability also improved during 2024, as reflected in the above inflation increase in the gross operating surplus of companies. The improving environment was also echoed in the sizeable total return on the FTSE/JSE All Share Index in 2024 (+13.4%), reflecting the promising earnings potential of listed companies.
In real terms, take-home pay also increased to R15,659 in January 2025, a notable 12.8% up on year-ago levels, and reached its highest level since February 2022, according to Naidoo. This was driven by the significant moderation in consumer inflation during 2025, from 5.3% in January to 3.0% in December, which has had a positive impact on the purchasing power of salary earners. Additionally, the headline CPI averaged 4.4% in 2024, the lowest annual rate since 2020.
'As such, the real take-home pay averaging at R14,292, up by 3.1% in 2024, represented the first real increase in take-home pay since 2020,' says Kruger. On the assumption that inflation will remain well-contained in 2025, with the average headline CPI forecasted to be at 4.2%, 2025 could be the second consecutive year of positive real take-home pay growth.
The observed recovery in disposable income has been reflected in healthier retail sales, with real retail sales growth for 2024 at 2.5% higher than the previous year, compared to -1.2% in 2023. Passenger car sales have also started to recover towards the end of 2024, with full-year growth of 1.1% compared to the 4.3% contraction in 2023. The cumulative 75bps reduction in interest rates and Two-Pot Retirement System withdrawals would have supported consumer spending.
Salaries expected to improve – provided current conditions hold
Looking ahead to 2025, the economic outlook indicates that the salary gains seen in 2024 could continue to strengthen.
On the economic front, real GDP growth is forecast to increase by 1.7% in 2025, somewhat higher than in 2024. The acceleration in growth will be driven by a combination of improved household consumption expenditures, higher fixed investment spending, and further advances in structural reforms.
An ongoing focus on improving South Africa's electricity generation capacity, addressing supply-chain blockages relating to freight rail and port operations, and upgrading water infrastructure, among others, are much-needed actions to propel the economy forward.
'The anticipated improvement in the business environment is expected to enable companies to offer more substantial salary increases in 2025, which in combination with a moderate inflation environment, could mean a second consecutive year of a real increase in take-home pay,' says Kruger.
However, if the 2025 National Budget had been tabled with the 2% VAT increase, it would have derailed the positive inflation outlook somewhat, eroding the fragile recovery in the purchasing power of salary earners.
'While we await the revised budget on 12 March 2025, the postponement has introduced uncertainty, raising concerns about its potential impact on the economy's recovery prospects,' ends Kruger.
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