October 31, 2023

Does Your Salary Make it Through the Month?

Inflation and the South African salary

When it comes to making a salary last, South Africans are constantly forced to find new ways to stretch their budgets. 

Whether it’s increasing inflation rates or the cost of living climbing higher than ever before, what was considered a “decent” salary in previous years simply doesn’t seem to cut it anymore.

Unfortunately, this means that many turn to using credit cards or short-term loans to make it through the month. 

Read: More South African Households are Turning to Credit Cards

But with no end in sight and even more increases on the cards, where does the debt end?

Inflation Rates on the Rise in South Africa

In September 2023, Stats SA revealed that the producer price index (PPI) that was originally forecast by both Nedbank and Absa earlier in the year was incorrect.

Rather than a 3.7% total increase, it was increasing by 1% month-on-month until August 2023. The PPI measures inflation from the producer’s perspective, which is a good indicator of what consumers can expect once it reaches them.

A high increase in PPI is a worrying indicator that inflation rates will hit the salary of everyday South Africans harder than ever before.

Main Contributors to Rising PPI

It is believed that there are 3 main factors that are headlining the rise of the PPI annual inflation, which in turn affects consumer inflation rates.

The 3 factors include:

  • Food products, beverages and tobacco products – These items have increased by 4.9% year-on-year and have contributed 1.3 percentage points.
  • Metals, machinery, equipment, and computers – These products have increased by 10.1% year-on-year and contributed 1.4 percentage points.
  • Paper and printed products – These items have increased by 13.4% year-on-year and contributed 1.1 percentage points.

Read: 5 Reasons Why South Africans Are Buckling Under Their Debt

Unfortunately, there’s no end in sight, as economists from Nedbank have shared that they expect inflation rates to continue to rise in the months ahead.

“The upward pressure will continue to come from higher local input costs, including electricity tariffs, increased use of diesel generators or the expense of installing alternative electricity sources due to persistent load shedding,” the Nedbank economists shared.

“At the same time, the rand remains volatile due to choppy global risk appetites given the uncertain global growth outlook, the threat that US interest rates could stay higher for longer, concerns about the impact of electricity shortages on domestic growth prospects and political rhetoric ahead of next year’s elections.”

A Middle Class Salary Won’t Cut It Anymore

With all of the recent inflations, increases, and rising costs, the average South African salary hasn’t been able to keep up. According to recent research, the definition of a middle-class salary has increased to R25,000 per household and R15,000 per individual.

Anything below this and staying afloat will be more difficult than ever. In fact, even households that have disposable income are struggling to make ends meet as there’s less stability in the economy overall.

The strain of rising costs has many knock-on effects. A massive 69% of consumers in South Africa have shared that they cannot pay their bills on time every month. A total of 33% of homeowners also revealed that they had paid their home loan repayment late in the last year.

Read: 3 Ways To Get Out of Debt

It’s been estimated that if you have a bond of R1.5 million, a car loan of R300,000 outstanding, and a personal loan of R50,000 owing, you’re paying an extra R5,400 per month compared to 2021. 

In order to sustain payments and keep up with growing inflation, an additional R8,900 is required monthly. Which amounts to more than R106,000 yearly.

With costs like this, it’s no wonder that more South Africans are turning to credit companies and creating more debt than ever before. While this may feel like the only way out, debt only makes dealing with rising inflation rates and costs even harder. But there is a solution.

Stretch Your Salary – Contact Debtline Today

At Debtline, our goal is to help you break the cycle of bad debt and live a life where you can manage your money without the strain of collection companies on your back.

As NCR-registered debt counsellors, we have the ability to assess your needs, create a debt relief program that works for you, and negotiate terms with your creditors. We’ll walk you through the process of Debt Review and help you navigate becoming debt-free as soon as possible.

You can contact us directly to learn more about the services we offer, or you can reach out via the form on our homepage. We’ll get back to you and help you discover what works for you and your pocket as a South African citizen.