Our original article describing a methodology by which to formulate a scientifically derived salary increase for 2019, and the subsequent November 2018 update, both recommended a 6.5% salary increase for 2019; based on an anticipated 2019 inflation rate of 5.5% and a real increase of 1.0%.

Given that many companies are now moving ever closer to their increase cycle, it is necessary to interrogate whether the two input parameters (inflation and the real increase), remain accurate considering new economic data.

We have adjusted our inflation rate forecast for 2019 due to the following factors:

  • The Monetary Policy Committee (“MPC”) increased interest rates by 0.25% to 6.75% at the November 2018 meeting. This action demonstrates that the MPC are determined to ensure that inflation remains entrenched in the middle of the 3% to 6% target and will not hesitate to use monetary policy to control inflation; and not bow to political pressure to irresponsibly stimulate growth; and
  • The global markets experienced significant headwinds in late 2018 and the anticipated slowdown of the global economy, and especially the United States economy, should mitigate any possible increase in local inflation; and
  • Oil prices are stable and the reduction in the petrol price by R1.84 in December 2018 and R1.22 in January 2019, will exert downward pressure on inflation in the coming months; and
  • The rand has remained stable and has even appreciated in recent months. In early September 2018 it was 15.32 to the dollar but strengthened to 14.40 at the start of 2019. This trajectory has continued and is now trading at 13.75. Currency stability bodes well for future inflation.

Considering the above, we have revised our average 2019 inflation rate forecast down to 5.0%.

2019 SA Monthly Inflation graph

At the January 2019 meeting, the MPC also lowered their inflation forecast for 2019 to 4.8%, although several other analysts have maintained their forecasts at slightly higher levels (see graph alongside).

Our forecast of 5.0% is thus “middle of the road” in terms of the market view although the danger does lie to the upside.

2019 Inflation Forecasts

Our original article stated that “We contend that in the private sector, business affordability constraints will dictate that the historic “rule of thumb” real increase of 2.0% is a vestige of the past, and that the new normal real increase is 1.0%.” There is little doubt that business affordability will dictate that any real increase granted will be limited to no more than 1.0%. Economic growth remains anaemic (our expectation for 2019 is 1.5%), unemployment continues to hover around 27.0% and companies are finding it difficult to pass on increases in input costs to customers; resulting in lower profitability.

Considering the above, we have retained our forecast of a 1.0% real salary increase in 2019 and foregoing, we have lowered our forecast, and recommended, salary increase for 2019 from 6.5% to 6.0%.

2019 SA Monthly Inflation in graphic format - Axiomatic Consultants


We will however continue to revise our projections over the coming months to take account of incoming economic data. If you would like to receive these regular updates, please email us at so we can include you on our mailing list.