Khokhela was recently asked to provide guidance on how companies are adjusting salary increases in response to South Africa’s emerging low-inflation environment. With inflation dipping below 3% for the first time in several years, the question is timely yet layered with complexity.
At first glance, low inflation may suggest that salary increases could follow suit. However, the economic landscape tells a different story. Interest rates remain high, with only minor relief from recent 25 basis point cuts. The fuel levy introduced in lieu of a VAT increase will place pressure on logistics and the price of everyday goods. Global instability, especially in the Middle East, continues to add unpredictability to fuel costs. Simultaneously, South Africa’s GDP growth remains subdued, constraining corporate ability to offer high salary adjustments.
In this context, Khokhela conducted a short pulse survey across industries to explore whether these macroeconomic conditions have had a visible effect on implemented and predicted salary increases for 2025.
What the Survey Revealed
The survey confirmed that most companies are sticking to their initial projections of 5% to 5.5% increases, particularly for senior and middle management, mirroring trends from late 2024. However, some interesting nuances have emerged:
Executives and CEOs appear to have absorbed the most restraint so far, with up to 15% of respondents reporting no increases for these groups. Yet, forward-looking predictions show a shift to more standard increases in the 4.5%–6% range, suggesting that current conservatism may give way to moderation later in the year.
Middle and senior management show the strongest alignment between implemented and expected increases, with 50–55% of companies targeting the 5–5.5% band. This suggests these roles remain a core focus in talent retention strategies.
Specialists and general staff are also being prioritised, with many companies implementing or projecting 6% increases, likely to shield these groups from real or perceived erosion in purchasing power.
Unionised employees reflect the most diverse response. While 20% reported no increase yet, predictions indicate a more equitable spread of increases, with 45% expected to receive 6% and 15% even exceeding that mark.
Scepticism and Lag
The survey also echoes broader market sentiment, scepticism about the CPI. While inflation may technically be ‘low,’ employees and employers alike are experiencing steep cost increases in categories such as electricity, food, and transport. This disconnect often creates pressure on organisations to continue increases at higher-than-inflation levels, even when the macroeconomic narrative suggests restraint.
Salary increases lag inflation movements, companies adjust cautiously, they raise salaries after inflation rises and are slower to reduce them when inflation cools. This lag effect may explain why the dominant increase range remains above 5%, despite current CPI levels below 3%.
Not Business as Usual, But Not Yet a Paradigm Shift
In summary, Khokhela’s pulse survey confirms that most companies are taking a cautious but familiar path. They are not radically changing their increase strategies, despite the unusual inflation conditions. There is no widespread pivot to merit-only increases or freezes—yet. But should inflation remain suppressed, and cost pressures ease, we may well see a strategic rethink in how annual increases are allocated, possibly introducing more differentiated and value-based models in 2026 and beyond.
© 2025 KMAT Advisors T/A Khokhela Remuneration Advisors