Category Archives: Economic Research

Economic Research

PSCE – April 2019

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Overall

Total credit extended to the private sector (PSCE) increased by N$1.11 billion or 1.14% m/m in April, bringing the cumulative credit outstanding to N$99.1 billion. On a year-on-year basis, private sector credit extension grew by 6.71% in April, compared to 5.79% recorded in March. On a rolling 12-month basis, N$6.22 billion worth of credit was extended. N$2.86 billion worth of credit has been extended to corporates and N$3.80 billion to individuals on a 12-month cumulative basis, while the non-resident private sector has decreased their borrowings by N$199.1 million.

Credit Extension to Individuals

Credit extended to individuals increased by 7.0% y/y in April, an acceleration from the 6.3% y/y growth recorded in March. Most of the growth stems from an increase in shorter-dated debt, with overdraft facilities to individuals increasing by 0.9% m/m and 6.3% y/y. Other loans and advances recorded growth of 2.0% m/m and 21.2% y/y, while installment credit remained depressed, contracting by 1.2% m/m and 5.7% y/y. Mortgage loans to individuals grew by 0.4% m/m and 7.1% y/y.

Credit Extension to Corporates

Credit extension to corporates grew by 2.1% m/m and 7.7% y/y in April. On a rolling 12-month basis, N$2.86 billion was extended to corporates as at the end of April compared to N$2.05 billion as at the end of March. The month-on-month increase was mostly driven by corporates making use of short-term credit facilities, in particular overdrafts, which increased by 4.7% m/m and 9.0% y/y. Other loans and advances, which consists of credit card debt, personal and term loans, extended to businesses increased by 4.7% m/m and 26.2% y/y. Mortgage loans extended to corporates contracted by 0.8% m/m, but increased by a low 0.1% y/y.

Banking Sector Liquidity

The overall liquidity position of commercial banks increased by N$31.4 million to an average of N$4.15 billion during April from N$4.11 billion in March. According to the Bank of Namibia (BoN), the increase is attributable to SACU receipts, coupled with increased mineral proceeds during the period under review. The improved liquidity resulted in a further decrease in use of the BoN’s repo facility by commercial banks, with the outstanding balance of repo’s decreasing from N$479.3 million at the start of April to N$385.7 million by month end.

Reserves and Money Supply

Broad money supply rose by N$9.91 billion or 10.2% y/y in April following a 6.9% y/y increase in March, as per the BoN’s latest money statistics release. Foreign reserve balances rose by 4.9% m/m to an all-time-high of N$34.2 billion in April. The BoN stated that the increase is largely due to the increase in the SACU receipts.

Outlook

Private sector credit extension growth remained depressed at the end of April, increasing by 6.7% y/y. From a 12-month rolling perspective, credit issuance is up 13.1% from the N$5.51 billion issuance observed at the end of April 2018, with individuals taking up most (61.0%) of the credit extended over the past 12 months. Most of the growth in PSCE for April stemmed from shorter-dated debt. Our expectation is for private sector credit extension to remain under pressure as both consumer and business confidence remains low.

We expect the BoN to follow the SARB’s MPC decision to leave the Repo rate unchanged at its next MPC meeting later this month. Interest rates, however, remain accommodative and further rate cuts are unlikely to result in a meaningful increase in the uptake of credit.

Building Plans – March 2019

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A total of 158 building plans were approved by the City of Windhoek in March, 14 fewer than the 172 approvals recorded in February. The value of approvals was N$44.5 million lower at N$128.6 million in March, a 25.7% m/m decrease. The number of completions for the month of March stood at 37, valued at N$75.0 million. The year-to-date value of approved building plans reached N$574.5 million, 33.7% higher than in the first quarter of 2018. On a twelve-month cumulative basis, 2,194 building plans have been approved as at the end of March, an increase of 14.5% y/y. The 12-month cumulative value of plans approved reached approximately N$1.98 billion, a decrease of 11.0% y/y.

Additions to properties made up 127 of the 158 approved building plans recorded in March. This is a 7.3% m/m decrease in additions from the 137 additions recorded in February. Year-to-date 395 additions to properties have been approved with a value of N$240.8 million, a 25.7% y/y drop in terms of value.

New residential units were the second largest contributor to the number of building plans approved with 28 approvals registered in March, a 12.5% m/m decrease compared to the 32 residential units approved in February. In value terms, N$32.1 million worth of residential units were approved in March, 22.5% less than the N$41.4 million worth of residential approvals in February. 89 New residential units have been approved in the first quarter of 2019, 48% more than during the corresponding period in 2018. The year-to-date value of residential approvals reached N$241.3 million, 198.6% higher than during the first quarter of 2018.

Commercial and industrial building plans approved in March amounted to 3 units, worth N$6.1 million. This is the same number of units approved as in the prior month, but a decrease of 62.4% m/m and 15.9% y/y in value terms. Year-to-date, 8 plans for commercial and industrial purposes have been approved, valued at N$92.4 million. On a rolling 12-month perspective the number of commercial and industrial approvals have slowed to 38 units as at March, compared to the 54 approved over the corresponding period a year ago.

The 12-month cumulative number of building plans approved increased by 14.5% as at the end of March when compared to the corresponding period in 2018. A total of 2,194 building plans to the value of N$1.98 billion were approved over the last 12 months which represents a decrease in value of 11.0% y/y. The number of building plans approved, on a cumulative 12-month basis, has been increasing steadily since December 2017, but the value of cumulative plans has been decreasing since May 2018. We expect the economy, and construction activity as a result, to remain under pressure over the short-term, as both consumer and business confidence remains low.

NCPI – April 2019

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The Namibian annual inflation rate remained at 4.5% y/y in April, unchanged from March. On a month-on-month basis, prices increased by 0.4%, following the 0.2% m/m increase in March. Overall, prices in six of the basket categories rose at a faster annual rate than during the preceding month, five at a slower rate and one grew at a steady pace. Prices for goods rose by 4.4% y/y in April, while prices for services grew by 4.7%.

The alcoholic beverages and tobacco category displayed price increases of 1.6% m/m and 7.5% y/y in April, making it the largest contributor to annual inflation, accounting for 1.0% of the 4.5% annual inflation rate. The main driver in this basket category was alcohol prices which increased by 1.7% m/m and 7.6% y/y. Tobacco prices meanwhile increased at a rate of 0.8% m/m and 7.2% y/y. The relatively large increase in the prices of the alcoholic beverages and tobacco basket category can likely be explained by sin taxes that were announced during the budget speech in March, as well as second round effects stemming from the series of fuel price increases announced towards the end of 2018.

Transport, the third largest basket item, was the second largest contributor to annual inflation, accounting for 1.0% of the total 4.5% annual inflation figure. Transport costs increased by 0.7% m/m and 7.1% y/y. The purchase of vehicles subcategory saw price increases of 1.6% m/m and 4.6% y/y, while the operation of personal transport equipment subcategory recorded price increases of 0.6% m/m and 4.7% y/y. Brent Crude oil prices increased by about 6.5% during April, reaching US$73 per barrel at the end of the month. The Ministry of Mines and Energy once again announced that the government would finance the under-recoveries recorded during April, and subsequently kept fuel pump prices unchanged for the month.

Prices for the food & non-alcoholic beverages category was the third highest contributor to the annual inflation rate in April. Prices in this category fell by 0.2% m/m, but rose by 5.3% y/y. Prices in all thirteen sub-categories recorded increases on a year-on-year basis, with the largest increases being observed in the prices of vegetables, fruits and bread and cereals. We expect food price inflation to remain under upward pressure for the rest of the year, as poor rainfall during Namibia’s rainy season affects local food production.

The Namibia Statistics Agency (NSA) for the first time released regional CPI data for Namibia, grouping the country into three zones, based on the then Central Bureau of Statistics’ (CBS) 2005 grouping. Zone 1 consists of regions in the northern part of the country, namely Kavango East, Kavango West, Kunene, Ohangwena, Omusati, Oshana, Oshikoto, Otjozondjupa and Zambezi. Zone 2 covers the Khomas region and Zone 3 covers the remaining //Karas, Erongo, Hardap, and Omaheke regions. The zonal data shows that Zone 2 (Windhoek) has the highest annual inflation at 5.0% y/y, Zone 3 (East, South and West) the second highest at 4.8% y/y and Zone 1 (North) in third place with an annual inflation rate of 3.8%.

The Namibian annual inflation rate of 4.5% y/y continues to trend marginally higher than that of neighbouring South Africa’s 4.4% y/y. The South African Reserve Bank’s Monetary Policy Committee (MPC) yesterday announced their decision to leave the Repo rate unchanged. The SARB’s MPC lowered its forecast for core inflation from 4.8% to 4.5% in 2019. The probability of the SARB cutting rates has been increasing lately as a result of subdued inflation pressure and low growth forecasts, but these will likely need to be even lower to sway the MPC to cut rates. We expect the Bank of Namibia to follow the SARB’s decision at its next MPC meeting in June. IJG’s inflation model forecasts average inflation of 4.3% in 2019. The largest upside risk to this forecast, however, is higher transport and food costs.