The average formally employed non-agricultural salary in South Africa has beaten inflation by roughly R2,700 over the past decade.
Defining the middle class in South Africa is difficult due to the significant disparity between the wealthy and the poor.
The middle class theoretically refers to a class of people at the bottom of a social hierarchy, often defined by occupation, income, education, or social status.
However, there is no official definition regarding income, largely because the classification varies depending on the chosen population and the specific countries’ economic status.
With unemployment at 33.5%, even those earning R1 a month are counted among the 16.7 million employed.
However, despite several methodologies and types of research, there seems to be an acceptable income range suitable for defining the middle class in South Africa.
Eighty20 defines it as households earning nearly R25,000 and a personal income of R15,000.
The report states that this category includes 4.1 million income-earning, credit-active people with families, mortgages, and frequent shopping trips.
The Bureau for Economic Research (BER), in its latest report on consumer confidence, considers a household with earnings between R5,000 and R20,000 per month a middle-income household.
However, Discovery Bank and the South African Reserve Bank (SARB) place middle-income earners anywhere between R8,000 and R29,000 per month.
This means those who earn the average formally employed non-agricultural salary in South Africa are typically middle-class income earners.
Stats SA’s latest Quarterly Employment Statistics (QES) showed that the average formal, non-agricultural salary in South Africa is R26,791 per month.
The average salary is R12,060 more than it was in 2014 (R14,731), representing an 81.9% increase compared to a decade ago.
Inflation over the same period was 63.5%. If the average salary increased in line with inflation, it should be around R24,086 in 2024.
This means the average salary outpaced inflation by 18.4%, or R2,700, over the past decade.
The catch
While the average salary has increased well above inflation over the last decade, this does not tell the whole story.
The average salary reflects varying increases across all formal sectors, including government and public services, where salary hikes have been notorious for being higher than inflation in the past.
Headline inflation over the past ten years also does not reflect the huge increases seen in specific sectors, such as the 131% surge in car prices or the insane electricity price hikes over the years.
Inflation-beating cost-of-living increases have eaten away at any salary gains, which is highlighted in the data showing that middle-class South Africans remain under notable financial strain.
The DebtBusters Quarterly Debt Index for the second quarter of 2024 shows that household debt levels are still close to record highs.
The data showed that those who earn around the average salary in South Africa spend 63% of their income on debt repayments.
The data also shows that the value of unsecured debt has increased over the years.
This increase is typically used to afford the escalation in the cost of living, which has been stoked by the consecutive interest rate hikes since 2021.
What’s more, credit check data from PayProp revealed that the average disposable income in South Africa has also decreased from 27.2% to 23% of net income compared to a year earlier.
The positive news is that South African consumers could soon see some relief in the coming months, with the South African Reserve Bank expected to start cutting interest rates in September.
This positive shift is expected to continue into 2025, with forecasts of a 150 bps cut in total by July 2025.
Additionally, salary data is expected to remain positive for the rest of the year.
“A comparison of the average nominal BankservAfrica Take-home Pay Index for the five months to May 2024, to the corresponding period one year earlier, revealed a 6.8% increase and a 1.4% growth in real terms,” said Elize Kruger, Independent Economist.
“If sustained throughout the year, 2024 could turn out to be a notably better year for salaries, unlike 2023, when the average nominal BTPI increased by only 1.2%.”
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