Author Archives: IJGResearch

Namibia New Vehicle Sales – December 2016

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A total of 1,066 vehicles were sold in December, a 19.1% m/m drop from the 1,317 vehicles sold in November, and 32.7% lower than December 2015 when 1,583 vehicles were sold. For the calendar year of 2016, 16,598 new vehicles were sold, down 21.9% from the 21,246 vehicles sold over the previous calendar year. Vehicle sales have been lower than both 2015 and 2014, but still slightly ahead of 2013 levels.

Vehicle sales have been contracting on a year on year basis since mid-2015. The slowdown has been felt in both passenger and commercial vehicles, with passenger vehicle sales down 28.3% y/y and commercial vehicle sales down 35.4%. Within the commercial vehicle segments the light commercial category, which makes up the bulk of sales, has decreased by 32.2% y/y, while medium commercial vehicles sales have decreased by 28% y/y and heavy commercial vehicle sales have decreased by 76.4% y/y.

Passenger vehicle sales decreased by 17.8% m/m to 440 vehicles in December, while commercial vehicles sales decreased by 19.9% m/m to 626. This brings the total number of passenger and commercial vehicles sold in 2016 to 7,006 and 9,592 respectively. Of the 9,592 commercial automobiles sold, 8,838 were classified as light, 277 as medium and 477 as heavy commercial.

In 2016 Toyota and Volkswagen dominated the passenger vehicle market based on the number of new vehicles sold. Toyota and Volkswagen claimed 29% and 28% of the market respectively. They were followed by Ford at 7% and Mercedes at 5%. The rest of the passenger vehicle market remains very fragmented.

Toyota also remains the leader in light commercial vehicle sales with 48% of the market, followed by Nissan at 16%. Ford and Isuzu each claimed 11% of the number of light commercial vehicles sold in 2016. In the heavy category, Scania is the largest seller, commanding 43% of the market share.

The Bottom Line

Throughout the period of 2014 all the way to mid-2015, we saw robust growth in vehicle sales, which was driven by a strong consumer base supported by expansionary fiscal and monetary policy and real wage growth. However, 2016 was not a particularly good year for new vehicles as December numbers brought the year to a disappointing close. The slowdown was driven by two main factors. Firstly, the reduction in government spending had a direct and indirect effect on the demand for new vehicles. Both direct orders from government and the weaker economic environment have reduced the demand for capital goods. Secondly, higher interest rates and amendments to the Credit Agreement Act (which requires a deposit of 10% on all vehicle loans and limits repayment periods to 54 months) have reduced the availability of credit used to purchase these capital goods.

We expect the slowdown to continue into 2017. The full effect of interest rate increases normally takes 18 to 24 months to filter through to all areas of the economy. Additionally, lower government spending on capital expenditure should also put pressure on vehicle sales for the foreseeable future.

Building Plans – December 2016

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A total of 131 building plans were approved in December with a value of N$108.2 million. For the 2016 calendar year the City of Windhoek approved 1,872 building plans, well below the 2,467 plans approved in 2015. Cumulatively 2016 witnessed the approval of N$1.95 billion worth of plans, also well below the 2015 figure of N$2.20 billion.

The largest portion of building plan approvals were made up of additions to properties, from both a number and value perspective. Cumulatively 1,452 additions to properties have been approved with a value of N$ 926.8 million, 15.2% less in value terms compared to 2015 and 497 less than the number of additions observed in the previous calendar year.

New residential units were the second largest contributor to building plans approved. 286 residential units were approved in 2016, 96 less than 2015 when 382 units were approved. In dollar terms, N$553.3 million worth of residential plans were approved, 18.6% higher than the previous calendar year.

The number of commercial units approved in 2016 amounted to 84, valued at N$460.0 million. This compares to 136 units valued at N$636.9 million for the calendar year of 2015. On average over the last 10 years, 81 commercial units valued at N$496.6 million were approved annually.

The 12-month cumulative number of building plans approved ticked up slightly at the end of 2016. On a 12-month cumulative basis, 1,872 building plans were approved, 24.1% less than the same measure for December 2015. This figure has nearly halved from the peak in September 2013 to lows last seen in 1997. As a leading indicator for economic activity in the country this reinforces our view that we will see negative economic growth for the 2016 reporting period.

A lack of serviceable land has often been cited as the reason for the slowdown in building plans. The Municipality has indicated that there is a high demand for land, but little land left around Windhoek that can be developed. As a result, additions to existing property have exceeded new construction fourfold. However, the slowdown in additions point to less potential value in additions or possibly saturation of the available space.

At the beginning of 2016, the outlook for construction was relatively positive due to several large government projects expected to commence within the year. We revised this view several times during 2016, and our suspicions were confirmed at the most recent midterm budget. Government has cut both the development and operational budgets quite aggressively. Spending on construction was cut by a material N$1.5 billion in this financial year alone and a moratorium has been placed on all government construction projects going forward. This should have a negative effect on economic activity in general, but the construction sector in particular. Thus, we continue to forecast a contraction in the construction industry for 2017.