Author Archives: IJGResearch

Building Plans – May 2016

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A total of 103 building plans worth N$47.7m were approved by the city of Windhoek in May. On a year-to-date basis, 745 plans were approved, significantly less when compared to the 1,073 plans approved over the same period last year. In value-terms, approved plans on a year-to-date basis are worth N$796.9 million, again15% less than the value recorded over the same period last year. This year to date decrease in the number of plans approved is mostly due to the water constraints ongoing in Windhoek.

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On a monthly basis, 95 less building plans were approved in May than in April. The equivalent value for the plans approved in May came in at N$47.7m, 78.3% below the April figure. 10 residential units and 90 additions were approved by the municipality during May. The total value for residential units and additions approved in May stood at N$12.33 million and N$34.45 million respectively. The number of commercial and industrial plans approved in May declined to just 2, worth as high as about N$8 million.

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The subdued trend in the 12-month cumulative number of plans approved continued in May, bringing the number down to 2,139 units from 2,231 in April. This is reflected in the 12-month cumulative growth rate which was down 24% in May, posting negative growth for the 25th consecutive month. As shown in the graph below, the level of the 12-month cumulative number of plans approved has fallen far below the 20-year average for this measure.

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We have experienced a massive boom in the construction industry since 2010, especially over the last 4 years, with an average of N$2.265 billion worth of building plans approved over this period. From a GDP perspective, the Namibian construction industry contributes about 4% to total GDP.

As the construction at the B2Gold mine and the Tschudi copper mine has been completed during 2015 and construction of the Husab mine is nearing completion, the growth contribution from the construction sector is expected to have topped out somewhat.

Of major concern are the current water restrictions in the central part of Namibia. NamWater announced on 18 February 2016 that water supply to Windhoek will be cut by 20% in an attempt to postpone dams running dry from August this year to April 2017. Cabinet has also approved a water tariff increase of 10% during the current financial year. NamWater has given no indication as to when the implementation date for the hike will be. Although the decision to increase the tariff was made in March, the minister of communication and technology, Mr Tjekero Tweya, only made the announcement on 11 April. NamWater is only required to give a months’ notice before any hike is implemented.

Water restrictions and tariff hikes will directly affect economic activity in Namibia, impacting water dependent industries, such as construction. If further water restrictions and new tariffs are implemented, it would have a severe impact on the construction industry as they are heavily reliant on water supply and given the magnitude of construction activity in Windhoek, a standstill of construction activity in the capital would have a significant impact on the economy.

 

Namibia CPI – May 2016

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The Namibian annual inflation rate increased further to 6.7% in May. On a month on month basis, prices continued to rise, up 0.5% after the 0.6% uptick seen last month. On a year on year basis, six of the twelve basket categories grew at a quicker rate in May than in April, pushing up overall inflation. The biggest contributor to inflation on a monthly basis, as well as on an annual basis were price increases of food and non-alcoholic beverages.

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On a month on month basis, price increases in the food and non-alcoholic beverages basket category have largely been driven by oils and fats price increases as well as increases in bread and cereals prices. Annual inflation in the food and non-alcoholic beverages basket category jumped to 12.2% in May from 11.1% in April. Relentless drought conditions in the country coupled with the depreciation of the Namibian dollar and rebasing effects resulting from low oil prices on prior periods has led to high inflation growth in this basket category.

Alcoholic beverages and tobacco as the fourth largest basket category made the second largest contribution to monthly inflation followed by recreation and culture. On a year on year basis price increases on alcoholic beverages and tobacco increased from 7.1% in April to 7.3% in May. Alcoholic beverages and tobacco inflation has been consistently above the average inflation figure for most of the last five years when looked at on an annual basis, more consistently so than almost any other basket category.

The annual inflation rate for the category housing, water, electricity, gas and other fuels saw a moderate increase of 0.1% to 7.6% in May, after spiking from an average rate of well below 3% in 2015. Rapid price increases have been seen in this basket category mainly as a result of increases in inflation for rentals and other dwellings and will be higher for the Windhoek residents going forward, due to a 10% increase in water prices in June to be administered by the City of Windhoek.

The annual rate of inflation in the transportation basket category, the third largest category, slowed almost by half in May to 1.5% from 2.8% in April. This decrease was largely as a result of a decrease on the cost of operating personal transport equipment. We expect to see a pickup in transportation inflation due to recent fuel price increases in May as well as base effects coming through on the oil price.

May InflationGoing forward we expect a further uptick in inflation in June largely due to base effects caused by the drop in oil prices last year as well as more recent currency movements. Adverse effects of the drought currently affecting the region as well as the water crises in the capital should lead to further increases in food inflation and housing utilities inflation respectively in the coming months, helping to drive overall inflation higher.

 

New Vehicle Sales – May 2016

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A total of 1,535 new vehicles were sold during May, up 3.8% from the April sales of 1,479, however, 4.2% less than May 2015, driven by a slowdown in both passenger and commercial vehicle sales. At this point of the year, 7,278 vehicles have been sold so far in 2016, down 20.5% on the comparable period of 2015. This declining growth rate of new vehicle sales suggests that we may see another contraction in new vehicle sale this year, only to a much larger extent than the slight decrease seen in 2015.

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Rolling 12 month sales continued to contract in May, however at a slower pace than in April. Rolling 12 month sales contracted 14.4% in May to 19,366 vehicles, compared to 17,955 recorded in April.

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Sales of passenger vehicles fell by 1.6% month on month, from 680 in April to 669 in May. On an annual basis, total sales of passenger vehicles fell by 9.1%. Commercial vehicle sales decreased 0.1% year on year to a sales figure of 866 vehicles, which was due to lower sales numbers of medium and heavy commercial vehicles, slightly offset by an increase in sales of light commercial vehicles. On a monthly basis, commercial vehicle sales was 8.4% higher than in April.

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Toyota and Volkswagen continue to dominate the passenger vehicle segment with Volkswagen selling 268 (40%) vehicles and Toyota selling 190 (28%) of the 669 passenger vehicles sold. Toyota was however the market leader in light commercial vehicle sales, having the lion’s share at 51% of the market, followed by Nissan at 16% and Ford in third place with 14%. Commercial vehicle sales continue to come in higher than passenger vehicle sales as has been the long term trend.

The Bottom Line

We have seen exceptionally strong vehicle sales growth through 2014 and 2015, fuelled by a strong consumer base supported by expansionary fiscal policy and real wage growth, but the latest figures show that this trend is losing momentum. Strong vehicle sales over the last two years have elevated the base substantially which has led to lower percentage growth figures, although the number of vehicles sold as a whole is still relatively strong. However, we expect to see a decrease in vehicle sales as purchase of vehicles by Government will be reduced this year. The Ministry of Finance has allocated N$426.8 million to vehicle purchases in the 2016/17 National Budget, this is N$592.9m or 58.1% less than the N$1.019 billion what was spent on vehicles during the previous financial year. Further downside risks to this are rising interest rates which may limit marginal lenders from qualifying for financing as well as banking sector liquidity which may limit the amount of loans available to finance vehicle purchases.