PayInc Net Salary Index for May 2026 released on Wednesday raised alarm bells after data indicated that real salaries declined by 1.7% in the first five months of 2026, while at R20 262, real net salary reached its lowest level in approximately two years.
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South African workers are facing growing financial strain as rising inflation, fuel costs and economic uncertainty continue to erode purchasing power, with real take-home pay falling to its lowest level in almost two years.
This is according to the latest PayInc Net Salary Index for May 2026, which showed that real salaries declined by 1.7% during the first five months of the year despite modest growth in nominal earnings.
The report found that the average nominal net salary increased marginally to R21,510 in May, up 0.2% from April and 0.9% higher than a year earlier. However, after adjusting for inflation, the average real net salary fell to R20,262, the lowest level recorded in approximately two years.
Shergeran Naidoo, head of stakeholder engagement at PayInc, said salary growth had failed to keep pace with rising living costs.
“For the first five months of 2026, nominal net salaries increased by just 1.7%, while real salaries have declined by 1.7%, signalling a challenging year for consumers after two years of relatively strong earnings growth,” Naidoo said.
The deterioration in household finances comes as inflation has accelerated sharply in recent months. Consumer inflation rose from a low of 3.0% in February to 4.5% in May following a spike in fuel and transport costs linked to geopolitical tensions in the Middle East and higher global oil prices.
Elize Kruger, independent economist said the data paints a concerning picture for households already battling rising costs.
“This is placing increasing strain on household budgets and is likely to weigh on consumer spending and broader economic growth during the remainder of the year.”
The impact is already visible in spending patterns. PayInc noted that real household final consumption expenditure grew by only 0.1% quarter-on-quarter in the first quarter of 2026, down sharply from growth of 1.2% in the final quarter of 2025.
Consumers are increasingly directing spending towards necessities such as transport, housing, electricity and utilities, while expenditure on discretionary items including restaurant meals, hotels and certain food categories has weakened.
The report warned that higher interest rates are compounding the pressure on consumers. The South African Reserve Bank raised rates by 25 basis points in May following the resurgence in inflationary pressures, increasing borrowing costs for households already facing tight budgets.
Kruger said the combination of higher living costs and uncertainty was likely to affect business confidence as well.
“Companies are likely to remain cautious in their investment and hiring decisions until there is greater clarity on the economic outlook.”
Economists said the weakness in household finances could have broader implications for economic growth.
Professor Waldo Krugell, an economist at North-West University warned that weaker consumer spending could ripple throughout the economy.
“Consumer spending was thought to be the main demand-side driver of growth this year, so if they cannot spend it will have an impact on everything - right back to the sustainability of government debt,” Krugell said.
Prof Raymond Parsons, a North West University Business School economist said the decline in take-home pay was another indication that South Africa’s economic recovery had lost momentum.
“It should be seen in conjunction with a recent Debt Rescue Survey that nearly half of South African consumers are experiencing financial pressures and will struggle to manage if the Sarb were to raise interest rates further after the 25 basis points rise last month.”
Parsons added that the cumulative impact of high frequency data in the second quarter of the year suggests that GDP growth in this quarter may well be negative, before recovering later in the year.
“The economic outlook for the rest of 2026 will hinge to a large degree on the speed with which the global headwinds from the Middle East conflict dissipate in coming months.”
BUSINESS REPORT