Why South Africans feel poorer, despite earning more
It's not only the poor who get poorer. The middle and working class will be and feel poorer because of inflation.
Black News 
For many South Africans, month-end comes but without the payday sensation. Turning to credit, they get through mid-month. Dipping into savings, they cover expenses.
If you have to do the same, you’ll feel poorer, even if you’re earning more than last year.
Inflation is making you feel poorer
Salary increases are based on inflation targets. In South Africa, those targets range from 3% to 6%. When inflation surpasses these figures, your buying power decreases.
But inflation doesn’t affect everyone the same.
The inflation rate reported by the South African Reserve Bank (SARB) is based on the Consumer Price Index (CPI) set by Statistics South Africa (Stats SA).
That index is an average of multiple items weighted differently.
For example, if the price of maize meal decreases by 20% but the price of rice increases by 60%, the inflation rate isn’t the average between the two.
Instead, it will be based on what rice and maize meal contribute to the index. If rice contributes 30% and maize meal 70%, the inflation rate will be 4%.
Should you buy lots of rice but not much maize meal, you’ll feel the effects of inflation more.
Currently, restaurants and holiday accommodation are weighted more on the CPI than actual rents, electricity, fuel, and education. When school fees, rent, electricity, and fuel increase, those increases don’t influence the inflation rate as much as holiday accommodation.
You feel poorer, despite 5% inflation.
Common expenses and what they contribute to the CPI
| Expense | CPI Contribution (%) |
|---|---|
| Actual Rents | 4.37% |
| Electricity | 3.40% |
| Cereal products | 4.14% |
| Dairy and eggs | 1.83% |
| Meat | 5.10% |
| Fuel | 3.89% |
| Education | 2.41% |
| Health insurance | 6.17% |
| Restaurants and holiday accommodation | 6.12% |
Yet, the personal impact of inflation depends as much on your buying habits as your salary.
Salary increases aren’t keeping up with inflation
Consider your most recent salary increase.
If you receive a 4% salary increase, but inflation reaches 5%, your buying power decreases by 1%. You can afford to buy less than you did before.
You’ll either go into debt or reduce your spending to maintain your lifestyle.
Rethabile Joala spoke about this on an episode of CNBC Africa’s Power Lunch. Referencing the results of a LinkedIn poll, she highlighted that “many professionals don’t feel like they’re making meaningful financial progress.”
