The Big Squeeze: Why Your Salary Isn’t Stretching Far Enough In South Africa

The Big Squeeze: Why Salary Increases in South Africa Aren't Keeping

 Up with Life's Rising Costs – Dr Chris Blair shares his views

“Imagine that you are a factory worker in Johannesburg, scraping by on a modest wage. Your rent has gone up again, electricity bills are biting harder, and the price of maize meal - that staple in your kitchen - feels like it has doubled overnight. You hear whispers of a salary bump coming your way, but when it lands, it's barely enough to cover last month's groceries. Sound familiar? For millions of ordinary South Africans, this isn't just a bad dream; it's the daily grind. In 2025, as the economy stutters along with a forecast growth of less than 1%, salary increases are offering little relief against a tide of rising costs, rampant unemployment, and a government debt that is spiralling out of control. But why is this happening, and what does it mean for you, the person on the street just trying to keep the lights on?

“Let's start with the elephant in the room - the cost of living. It's no secret that everyday expenses are climbing faster than most pay packets can keep up, especially if you're on the lower end of the income scale. Inflation might be cooling a bit - hovering around 3.5% this year - but that is cold comfort when specific costs are skyrocketing. Electricity hikes of over 11% for municipalities in the 2025/26 period are slamming households already stretched thin (Competition Commission, 2025). Food prices, transport, and even basic telecoms like data bundles are all edging higher, reflecting shifts in consumer spending patterns. South Africans are now shelling out more proportionally on essentials like cereals and telecom services, with food and non-alcoholic beverages taking up nearly a fifth of household budgets in the CPI basket of goods. This isn't hypothetical economics; it's you choosing between filling the petrol tank or buying school uniforms for the kids.

“For low-income earners - think domestic workers, retail staff, or informal traders - the gap is widening alarmingly. Wages in these sectors have been described as stagnant, barely budging while inflation erodes purchasing power. Between 2020 and 2025, average salaries rose by about 25%, but inflation chewed through 28% over the same stretch, leaving many worse off in real terms (Daily Investor, 2025) - that's a net loss!. You're running harder just to stand still. Trends show that salary adjustments often lag behind these cost pressures, particularly for the working class who face not just higher prices but also the burden of supporting extended families amid job scarcity. Economists point out that while overall salary budgets across Africa are projected to rise reasonably - around 6.7% in 2025 according to 21^st Century (www.21century.co.za) - this average mask the reality for lower earners, where increases are often lower than the real inflation for these earners, failing to bridge the "cost-of-living gap". It's a vicious cycle: higher costs lead to more debt, and more debt means less room to breathe.

“Now, layer on unemployment, and the picture gets even bleaker. South Africa's jobless rate hit 33.2% in the second quarter of 2025, up from 32.9% earlier in the year – that's over a third of the workforce sidelined (Trading Economics, 2025). If you include those who have given up looking, the expanded rate nudges 42.9% (Statistics South Africa, 2025). Youth unemployment is a catastrophe, clocking in at around 46% for those aged 15-24, with some reports pegging it even higher for certain groups. This is not just numbers on a page; it's families where one salary supports multiple dependents, stretching thin resources even further. In a sluggish economy, businesses are hesitant to hire, opting instead for cost-cutting measures that keep wages suppressed. High unemployment fuels inequality, making it tougher for low earners to negotiate better pay. After all, with a million applicants vying for just 5,000 jobs in some cases, who has the leverage? (Daily Investor, 2025). For the man in the street, this means more competition for scarce opportunities, and salary increases that feel like crumbs rather than a fair share.

“Then there's the government's debt monster, lurking in the background and gobbling up funds that could ease the pressure. National debt has ballooned to around R5.7 trillion as of early 2025, equating to nearly 77% of GDP – and it is set to climb higher, potentially reaching 78.4% by 2026 (Fitch Ratings, 2025). The International Monetary Fund echoes this, projecting gross debt at 79.6% of GDP for the year (IMF, 2025). Why does this matter to you? Because servicing this debt – paying the interest – is eating into the budget. Debt-service costs are rising faster than overall spending, at about 7.4% annually versus 5.4% for other expenditures (OECD, 2025). That means less money for social grants, infrastructure, or job creation programmes. The government is borrowing roughly R1.6 billion daily just to stay afloat, pushing up taxes and tariffs that hit your pocket directly (The Star, 2025). It's a debt trap that's spiralling, forcing austerity measures that trickle down as higher costs for basics like electricity and fuel. For low-income households, this translates to even tighter belts, as salary tweaks fail to offset these systemic squeezes.

“Zoom out to the broader economy, and it is clear why salary trends are so lacklustre. GDP growth in 2025 is limping along at around 0.9%, - far from the robust expansion needed to create jobs and boost wages (World Bank, 2025). The first quarter saw a measly 0.1% uptick, barely keeping the lights on after years of stagnation (Statistics South Africa, 2025b). Global headwinds, like trade disruptions and geopolitical tensions, are not helping. South Africa's export sectors are under threat, with tariffs from major partners like the US adding more pain. Business confidence is tepid, leading firms to prioritise survival over generous pay rises. In this environment, salary increases are often pegged to inflation forecasts, but with volatile prices - think fuel and food spikes - they end up falling short. Historically, adjustments have aimed to "make up the gap" from previous years, but in 2025, they are more about damage control than real gains.

“So, what's driving these modest salary trends? Employers are navigating uncertainty by linking increases to economic indicators like the Consumer Price Index (CPI) and Producer Price Index (PPI). CPI, which tracks household costs, has been the go-to benchmark, with updates to its "basket" of goods reflecting modern spending on things like e-hailing and ready-made meals. But here is the rub: while salary hikes might edge above CPI in good times, current trends show them struggling to outpace it, especially for entry-level roles. Median salary increases remain modest across levels, with general staff seeing adjustments that are only slightly higher than those for executives, reflecting a cautious approach where lower earners get a marginal edge to combat living costs, yet still not enough to provide real relief (HR Future, 2025). Performance-based elements are common, but for many low earners, it is a flat cost-of-living adjustment that is swallowed by rising expenses. Remuneration forecasts suggest organisations are budgeting cautiously, with increases that sound decent on paper but evaporate against debt repayments and bills (Axiomatic, 2025). The South African Reserve Bank's repo rate cuts - from 8.25% to 8% - offer some relief on loans, but it is not enough to close the chasm.

“For you, the average Sipho battling debt and bills, this all boils down to one thing - survival mode. Personal debt is at record highs, with many turning to credit just to cover basics. Unions are pushing for fairer deals in 2025 negotiations, arguing that a "fair wage increase" should at least match inflation plus a bit for productivity (Labour Research Service, 2025). But with economic growth sluggish and debt burdens mounting, real change feels elusive. Yet, there's a glimmer of hope - megatrends like global trade shifts could open export doors, potentially sparking job growth if policymakers act (African Development Bank, 2025). Infrastructure investments might finally kick in, lifting sectors like construction.

“In the end, salary increases in South Africa right now are like a plaster on a gaping wound - helpful but not healing. If you are struggling, you are not alone. Demand a living wage from employers, vote for policies that tackle debt and jobs, and maybe even upskill to jump into scarcer, better-paid roles. The economy is tough, but South Africans are tougher so hang in there; change starts with awareness.”

This article is based on research conducted by Dr Chris Blair of 21st Century, one of the largest remuneration and HR consultancies in Africa. Please contact us at [email protected] for any further information.

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