Author Archives: IJGResearch

Building Plans – February 2016

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A total of 182 building plans were approved by the City of Windhoek in February 2016. This is an uptick in the number of plans approved on a monthly basis when compared to the 166 plans that were approved in January. The value of building plans totaled N$211.9 million, largely driven by commercial properties being approved.

29 residential units and 140 additions were approved by the municipality during February, The value of the plans approved for additions and houses were valued at N$52.6 million and N$22.8 million respectively, while 13 commercial and industrial plans got the go-ahead in February. The value of commercial and industrial buildings approved in February totaled N$136.5 million, accounting for 64% of the value of total plans approved.

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The 12-month cumulative number of plans approved continued to lose momentum during February, falling to 2,367 compared to 2,398 in January, with the year-on-year growth rate contracting by almost 14%, posting negative growth for the 22nd consecutive month. As shown in the graph below, the level of the 12 month cumulative number of plans approved has fallen well below the 20-year average number of plans approved of 2,500.

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Namibia 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 that were approved over this period. From a GDP perspective, the Namibian construction industry contributes about 4% to GDP, or N$5.776 billion recorded 2014.

In our view, the Namibian construction sector will remain vibrant during 2016, with both private sector and government having aggressive development plans. However, as the construction at the B2Gold mine and the Tschudi copper mine being completed during 2015 and construction of the Husab mine nearly completed, the growth contribution from the construction sector is expected to decline.

A major concern is the possibility of water restrictions in Namibia, especially in the central region. NamWater announced 18 February 2016, that water supply to Windhoek will be cut by 20% in an attempt to postpone dams running dry in August this year to April 2017. Water shortages and restrictions in Windhoek will directly affect economic activity in Namibia, impacting water dependent industries, such as construction. If water restrictions 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 total GDP.

Namibia CPI – February 2016

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The Namibian annual inflation rate increased to 6.1% in February, up 0.8 percentage points from 5.3% in January. On a month on month basis, prices continued to rise, up 0.6% after the 2.4% spike seen last month. On a year on year basis, six of the twelve basket categories grew at a slower rate in February than in January while the other half accelerated, pushing up overall inflation. Transport inflation spiked during February as the effects of the drop in the price of oil over the past year, and the knock on effects thereof on the rest of the basket has worn out. However, the biggest contributors to inflation on a monthly and on an annual basis were price increases of food and non-alcoholic beverages and housing utilities.

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The three heavy weighted categories in the basket that experienced accelerated annual inflation were food & non-alcoholic beverages, alcoholic beverages & tobacco and transport. Food and non-alcoholic beverages inflation was driven by the price increases across the majority of the sub-components, with only milk, cheese & eggs, non-alcoholic beverages and coffee, tea & cocoa prices rising relatively less quickly. The food price increases can largely be ascribed to the drought currently experienced in Namibia and South Africa as is reflected by price increases of fruit, vegetables and grain products such as bread & cereals.

The annual inflation rate for the category alcoholic beverages & tobacco increased from 7.5% in January to 7.9% in February and increased 0.6% on a monthly basis. Accelerating price increases in this category was largely driven by alcoholic beverages which increased to 8.3% in February, slightly offset by prices of tobacco easing to 6.7% in February, down from 7.4% in January. On the back of the announcement by the Minister of Finance that sin-taxes have been increased, we expect prices of alcoholic beverages & tobacco to accelerate further in March.

The annual inflation rate for the transport basket category spiked to 4.7% in February after turning positive in January for the first time in twelve months. The reason for this jump is primarily due to base effects, as the effects of the drop in the price of oil over the past year have now worn out. Transport is the third largest basket category by weighting and as such has had a large impact on overall inflation. The prolonged low fuel prices, due to the oil rout, have provided consumers with some price relief worldwide, and to some extent in Namibia as well. The effects of cheap transportation flow through to many other basket categories, and in this way contributed to lower overall inflation. However, we expected to see higher inflation as the effects of the drop in the price of oil over the past year and the knock on effects thereof wear out.

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In conclusion, we expect inflation to accelerate further in 2016 as the full benefit of cheap oil has worn out with the weak currency causing import prices to rise. Looming drought conditions as well as increasing utilities costs should further see inflation pick up in basket categories such as food and non-alcoholic beverages, and alcoholic beverages and tobacco and housing.