TRENDS IN PERSONAL INCOME ESTIMATES (2011 – 2021)

As the global economy rebounded from the COVID-19 pandemic, continued policy accommodation and supply shortages increased the prices of many goods and commodities. After the pandemic-induced contraction of 6.4% in 2020, South Africa’s economy started to recover in 2021, recording an economic growth rate of 4.9%. Local economic growth was supported by favourable global demand and commodity prices, as well as the rebound in domestic economic activities from the 2020 recession. However, the recovery has not translated to a recovery in employment as nearly 1.9 million less people were employed at the end of 2021 compared to the quarter before the onset of the pandemic.

In order to investigate personal income positions of consumers, given the macroeconomic circumstances indicated above, the BMR income and expenditure model was updated with the latest available data to obtain the estimates provided in this report. Following a comprehensive benchmarking and rebasing process undertaken by Statistics South Africa (Stats SA) in collaboration with the South African Reserve Bank (SARB), revised national account statistics which was published in August 2021.  This process resulted in revisions in macro level estimates which impacted the parameter identification and weighting process of the BMR Income and Expenditure model. All previous monetary estimates for the period 2011 to 2020, therefore, required upward adjustments and the results indicate that the revised annual total and cash flow income estimates are on average 13.5% and 13.0% higher than the previous annual estimates. Specifically, the revised estimates for 2020 shows an additional R594 613 million in total income and R477 422 million in cash flow income when compared to the previously published estimates. The revised annual growth rates in personal income remained very similar to previously published rates.

The 2021 results for the adult population (aged 15 years and older) indicate that total income is estimated to have increased from a total value of R4.63 trillion in 2020 to R5.06 trillion, reflecting an increase of 9.2%. Cash flow income recorded an even higher growth rate of 10.2% during 2021, from R4.1 trillion in 2020 to R4.4 trillion in 2021. The increase was mainly driven by a significant increase in dividend income, following a substantial decline in 2020. The income estimates imply an estimated annual cash flow income of R102 380 per capita (per person) for the adult population in 2021. The main difference between these income definitions is that income of a non-cash nature such as income in kind and imputed rent are included in total income but are excluded from cash flow income.

Skewed income distributions persist in South Africa. This is seen in that an estimated 75.2% of the adult population earned below R69 974 per annum (or approximately R5 800 per month), receiving 11.3% of total income and 8.2% of cash flow income during 2021. In contrast only an estimated 3.8% of the adult population earned more than R575 886 per annum (approximately R48 000 per month), but they received 44.5% of total income and 47.3% of cash flow income. The analysis further showed 13.3% of the adult population relies mainly on grants as cash flow income source.

OUTLOOK FOR PERSONAL INCOMES IN 2022

Economic and financial conditions are expected to remain more volatile for the foreseeable future due to significant pressures on local economic growth, employment creation and rising inflation originating from international and local political pressures. Rising inflation hurts the purchasing power of low-income households and negatively affects the country’s competitiveness and financing costs. Other factors inhibiting growth in the local economy include electricity supply constraints, recent flooding, , industrial action, corruption and mismanagement in government, political instability, and poor government service delivery. Economic and financial conditions therefore are expected to remain more volatile for the foreseeable future. Gross Domestic Product (GDP) growth rates in South Africa are expected to decline from 4.9% in 2021 to 2.2% in 2022. Although this appears to be a much lower growth rate compared to the previous year, it should be kept in mind that the 2021 growth rate was from a low base following the negative economic growth rate of 2020 due to the impacts of the COVID-19 pandemic on the economy.

The BMR Income and Expenditure model indicate that following the personal income declines in both total and cash flow income terms experienced in 2020 due to the COVID-related lockdowns and resulting economic contraction and job losses, there has been some recovery of personal incomes in 2021. It is expected that such positive personal income growth will continue in 2022 with an estimated growth rate of 6.9% in nominal total income and 7.2% growth in nominal cash flow income. This translates to an increase of R348 billion in total income and an increase of R318 billion in cash flow income expected during 2022.

Growth in income is expected to mostly originate from income from grants, due to a continuation of the social relief of distress grants, an expected increase in the number of grant recipients as well as the announced increases in the monthly values of social grants. Growth in income is further supported by expected growth in investment and pension and annuities incomes due to expected growth in financial assets. The recovery process for the economy in general will most likely continue to be slow and it is estimated that output and employment will remain constrained, with considerable uncertainty surrounding the future for consumer finances.

PERSONAL INCOME ESTIMATES FOR SOUTH AFRICA, 2011 – 2022 (Research Report No 520) was compiled by Ms J Meiring (BMR Senior Researcher).  For any enquiries regarding the press release content, please contact Ms Meiring at jacolize.meiring@bmr.co.za