South Africans take less home each month, while the costs of basic things like food, fuel and electricity continue to rise.
New wage data from the monthly BankservAfrica Take-home Pay Index (BTPI) reported that the average nominal salary has notably fallen from R15,570 at the start of the year to R14.600 in June.
Shergeran Naidoo, head of stakeholder engagement at BankservAfrica, pointed out that nominal salaries have remained below R15,000 for the second month in a row, down 1.8% from a year ago.
The last time the nominal average home wage was this low was in July 2021, data from BankservAfrica shows. The company noted that four of the past seven months have seen negative year-over-year growth in nominal wages.
The chart below illustrates the monthly home wage that has been steadily declining over a year and a half:
Stagnant wages home is bad news for consumers already constrained by inflationary pressures.
StatsSA reported earlier in July that consumer inflation has accelerated to its highest level in more than a decade, with headline inflation at an annualized 7.4% in June – the highest since 2009.
Absa said in its latest third Quarterly Perspectives report that the CPI could peak at 7.9% in October and remain above the 6% high of the target range through mid-2023 and the 4.5% midpoint through 2024.
“Our relatively bullish oil price assumption leaves some downside risk to our CPI forecast, but like the SARB, we see the balance of inflation risks on the upside,” it said.
Inflationary pressures are driven by higher fuel prices, which has had a knock-on effect on the transport sector and food prices.
These rising costs have been exacerbated by higher electricity rates, which came into effect for municipal customers in July.
The price of consumer goods across the country has risen dramatically, with one of the most tangible being the rising price of groceries.
The Affordability Index for Households by the Pietermaritzburg Economic Justice & Dignity group (PMBEJD) for June 2022 shows that a shopping basket has increased by almost 14% in the past year.
The index tracks the average price of a household food basket made up of common products over time.
The group reported that the household food basket currently costs R4,688, an increase of R560 (+13.6%) from the previous year. Products with the highest price increases included cooking oil, spinach, cake flour and chicken livers.
The chart below shows the Household Affordability Index over a year and a half:
StatsSA reported that inflation for food and non-alcoholic beverages continued to accelerate, reaching 1.2% m/m and 8.6% y/y in June 2022.
Despite delays for motorists in terms of petrol price, total transport costs continue to rise.
Month-end data from the Central Energy Fund shows that the price of gasoline could fall for the first time in months, with gasoline price showing an excess profit of 200 cents per liter and diesel a smaller excess profit of 160 cents per liter. .
However, August will also see an end to government interventions on fuel taxes, with 75 cents per liter being added back into the price, forecasting a drop of 125 cents per liter for petrol and a drop of 85 cents a liter for diesel.
The Ministry of Mineral Resources and Energy confirmed that there will be a “significant” drop in fuel prices in August, even if the interventions are removed.
However, even with a possible price drop of R1.25, fuel prices would have increased by 45% year-on-year in the past 12 months.
(Note: Gasoline prices are from the South African Petroleum Industry Association)
However, the transport costs extend beyond the fuel price.
Naked Insurance recently presented data showing that consumers are in a “perfect storm” of higher car ownership costs, while car owners pay higher interest rates on financed vehicles, the cost of servicing and maintaining a car has risen due to pressure in the supply chain, and deteriorating roads coupled with load deposits increase the frequency of accidents.
The PMBEJD also tracks transportation costs for low-income households, noting that taxi fares for a month of travel increased nearly 7% year-on-year (June 2021 to June 2022).
These costs are now also expected to escalate further, with taxi associations announcing in July that fares would need to be increased by as much as 30% to keep up with rising fuel prices and maintenance costs.
In addition to high transport costs, households feel the effect of municipal electricity tariffs, according to the Bureau for Economic Research (BER).
At the beginning of this month, major metropolitan cities – including Cape Town, Johannesburg and Durban – introduced an increase in municipal electricity rates after national energy regulator Nersa approved a 7.47% increase.
The chart below compares the average price of 1 kWh of electricity over a 10-year period in cents:
Prepaid users have also felt the bottleneck. The PMBEJD’s tracking of the spending of low-income households shows that a household that consumes 350 kWh of prepaid electricity per month has seen its bills rise by 13% in the past year.
And Eskom will submit a proposal to energy regulator Nersa in August for tariff adjustments in 2023. Among the proposals in the application is a substantial tariff increase of more than 32%. It will also represent a fundamental shift in the way it charges service fees.
Under Eskom’s current tariff structure, the variable and fixed costs accumulated in the production of electricity are paid through a single electricity tariff – calculated per kWh of consumption. A user who consumes 0 kWh of electricity currently pays a flat fee of R218 per month, which escalates as power consumption increases.
However, according to the proposed rates, the same household using 0 kWh of energy from Eskom would pay R720 extra, bringing the total to R938 per month.
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