Workers are earning less – and that’s unlikely to change soon

As rolling blackouts continue to affect company productivity, South African employers have tightened their belts. The gap between salary increases and inflation continues to widen, leaving employees with what is effectively less money than they were earning a year ago. No fewer than three studies released in the past week paint the same dire picture.

The latest biannual Salary and Wage Movement Survey Report from Remchannel shows that employers expect to award wage increases of 4% to 6% in the next year, appreciably below the current 7% inflation rate, denting employees’ disposable income and placing pressure on companies to keep staff engaged and retain their critical skills.

The internet-based survey represents a broad cross-section of companies. Most are unlisted (65%), some listed (28%), and a smaller representation of government sectors (7%). Almost 350,000 employees were included, ranging from unionised staff up to executive management.

Blackouts stunt activity

Over the course of this year, the economic climate has continued on a downward trajectory. GDP growth for the fourth quarter of 2022 slowed more sharply than expected, to 0.9% year-on-year, and was down 1.3% on a quarter-on-quarter basis.

Andrew Rymer, a senior strategist in the strategic research unit at asset manager Schroders, says the rise in blackouts through the quarter, as the electricity situation deteriorated, weighed on broad activity.

“Last year was the worst on record for load shedding… and [the power crisis] was more severe in the first quarter of this year,” he says, adding that GDP growth expectations for 2023 are now less than 1%, with power problems set to remain a constraint on activity.

Rymer says the higher interest burden for households, after 18 months of policy tightening, is weighing on consumption. At the same time, food inflation ticked up to 14.4% in March, its highest level in 14 years.

Investec’s chief economist, Annabel Bishop, notes that transport costs, the second largest driver of CPI inflation, saw no change to petrol prices in April.

“However, May is likely to see a modest lift in petrol prices, as international petroleum prices increased on higher oil prices,” she says.  

René Richter, managing director of Remchannel, says South African households are under pressure, with the vast majority of blue-collar emplo­yees becoming poorer. 

Richter believes that though there is less hype about the “great resignation” with the pandemic now over, it is certainly not disappearing. The survey suggests organisations lose experience and accumulated knowledge when staff leaves.

The Remchannel findings tie in with the latest BankservAfrica Take-Home Pay Index (BTPI), which shows that the unexpected headline inflation increase in March, among other factors, led to take-home pay slipping marginally during the month.

“Average nominal take-home pay in March declined on a monthly basis to R15,321,” says Shergeran Naidoo, BankservAfrica’s head of stakeholder engagements. “However, this was still 1.8% higher than the R15,046 recorded a year earlier.”

Salaries measured in the BTPI have been disappointing over the past year. The Remchannel survey shows that labour turnover averaged 16.6%, and as much as 41% of this turnover could be ascribed to resignations.

In South Africa, the “great resignation” is ring-fenced in the professional and specialist roles of scarce skills in the market, and Richter says com­panies can do much more to quantify and contain costs and examine and curtail the high labour turnover.

“It remains a concern that companies are not recording and analysing the reasons for their labour turnover, or are more dedicated to measuring the costs related to staff terminations and the subsequent replacement and recruitment of staff,” she says.

The highest resignation rates are in the financial services and information and communications technology sectors, followed by the retail and consumer manufacturing sector. Employees working in marketing and human resources were the most likely to resign.

Why people are resigning

Richter says “push factors” for resignations include:

44% – better career prospects, higher remuneration and improved employment conditions;

20% – burnout, stress, changing careers or emigrating; and

9% – a toxic workplace.

Traditionally, the number one reason for resignation has been better pay, followed by better career opportunities and development. However, as employees are affected by a lack of growth and an inability to meet their financial obligations – and on the back of having experienced a better work-life balance during the pandemic – they are considering alternatives to maintain their standard of living.

In line with the increased motivation for work-life balance, about 66% of employees want increased mobility and 63% more flexibility. Most employees also believe their productivity has increased in the work-from-home environment, while they enjoy a better work-life balance. Offering flexible work arrangements can involve a paradigm shift for organisations, especially smaller ones that might not have the critical mass of technology, budget, management and competi­tive flexibility necessary to make extensive use of flexible work arrangements.

“Employees want more flexibility and mobility, so employers must adopt a collaborative approach when [they are] considering a work model: office-based, remote or hybrid is an inherent requirement of the job,” Richter says.

“The average take-home pay has also moved mostly sideways since 2021, indicative of low to unchanged salary adjustments in the current ‘survival’ economy,” says independent economist Elize Kruger.

The recent depreciation in the rand/dollar exchange rate – plus the additional cost of production because of load shedding and related extra expenditure – has clearly added another layer of costs to the economy.

Job market unlikely to improve

BankservAfrica’s data – adjusted for weekly payments – suggest some jobs were created in February, and the data for March confirms a hesitant recovery with about 216,000 more salaries paid.

The local job market is still recovering from the heavy job losses incurred during the pandemic, which remains a challenge amid the low-growth reality in South Africa. According to the March 2023 Quarterly Labour Force Survey, total employment stood at 15.9 million at the end of 2022, compared with the pre-Covid level of 16.4 million in the fourth quarter of 2019.

BankservAfrica data suggest more volatility in lower-income categories, indicating companies are opting for more contract or casual workers over permanent positions.

A third survey released this week, the Altron FinTech Household Resilience Index (AFHRI), also reflected that higher inflation and higher interest rates are squeezing the finances of most households.

Johan Gellatly, the managing director of Altron Fintech, says the company commissioned economist and economic adviser Dr Roelof Botha to design the index, which includes 20 different indicators, all of which are related to sources of income or asset values.

“The index is weighted according to the demand side of the short-term lending industry and calculated on a quarterly basis, with the first quarter of 2014 being the base period. All of the indicators are expressed in real terms, ie after adjustment for inflation,” Botha says.

“In the fourth quarter of 2022, the AFHRI recorded a value of 111.5, compared to 109.9 in the third quarter of the same year, and 112.7 in the comparable quarter of 2021. This means that the average household’s financial disposition has improved by 11.5% in real terms over nine years.

“However, the average annual improvement since 2014 is only 1.2%, which serves as a clear indication of the economy’s underperformance,” he says.

He attributes this underperformance to:

• A decade of State Capture and public sector mismanagement between 2009 and 2018 that eroded business confidence and led to serious infrastructure deficiencies.


• Covid-19 lockdown regulations that decimated economic activity and led to the loss of more than two million jobs in the second quarter of 2020.


• Higher inflation, mainly owing to massive increases in freight shipping rates and global supply-side constraints.


• A return to restrictive monetary policy by the South African Reserve Bank (Sarb), despite the absence of demand inflation. The cost of credit – and of capital – has risen more than 60% since the Sarb started to raise interest rates at the end of 2021.

Botha says there was an upward trend in new job creation in 2022, but this was diminished by lower levels of remuneration. In real terms, the average monthly pay in SA has declined by 11.4% over the past year (from R18,470 in the fourth quarter of 2021 to R16,370 in the fourth quarter of 2022).

Although household financial resilience was boosted by a substantial increase in surrenders of long-term insurance policies, this trend is not conducive to future financial stability and is a clear sign of the hardship faced by many households.

“An indictment of the Sarb’s interest rate policy is the fact that total household credit extension has not remotely recovered from the effects of the extremely high real interest rates that existed before the pandemic and remains well below the level of a decade ago in real terms. Since 1998, the total value of outstanding mortgage advances has de­clined by more than 10% in real terms.”

Botha cautions that the SA economy has never been able to grow at sustainably high rates in the absence of meaningful growth in private sector credit extension.

“To the extent that unjustified hawkish monetary policy reduces output growth, fiscal stability will also be threatened. Inflation targets are not cast in concrete and the Sarb should consider a temporary adjustment... 

“This would immediately allow for a 100-basis-point reduction in the repo rate and serve to breathe some life into a stagnant economy,” Botha says. DM168

Neesa Moodley is an associate editor at Business Maverick.

This story first appeared in our weekly Daily Maverick 168 newspaper, which is available countrywide for R25.