Category Archives: Economic Research

Economic Research

PSCE – July 2019

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Private sector credit extension (PSCE) increased by N$86.3 million or 0.09% m/m in July, bringing the cumulative credit outstanding to N$100.32 billion. On a year-on-year basis, private sector credit extension saw a steady increased of 7.4% in July, as seen in the preceding month. On a rolling 12-month basis N$6.9 billion worth of credit was extended to the private sector, with individuals taking up N$4.1 billion while N$3.1 billion was extended to corporates, and the non-resident private sector has decreased their borrowings by N$210.7 million.

Growth in credit extension to individuals increased by 0.5% m/m and 7.4% y/y in July, compared to 0.7% m/m and 6.5% y/y growth recorded in June. Other loans and advances (which is made up of credit card debt, personal and term loans) grew by 0.6% m/m and 27.3% y/y in July. The increase in the uptake of short-term debt remains of concern as household demand continues to rise when compared to the use of more productive loans such as mortgages. Short term debt is characterized by high interest rates and high default rates compared to mortgage loans. Installment credit, often used to finance vehicles contracted by 0.3% m/m and 4.1% y/y. Mortgage loans to individuals grew by 0.7% m/m and 7.3% y/y, while overdraft facilities extended to individuals have increased by 1.0% m/m and 8.7% y/y.

Credit extension to corporates further contracted by 0.6% m/m following the 1.4% m/m contraction recorded in June. On an annual basis, however, credit extension to corporates increased by 8.3% y/y in July, compared to the 8.9% y/y growth registered in June. Overdraft facilities extended to corporates decreased by 0.8% m/m, but are still up 9.3% y/y. The year-on-year increase was caused by business in the fisheries and housing sector taking on overdrafts facilities. Mortgage loans to corporates contracted by 0.5% m/m but increased by 5.2% y/y. Installment credit extended to corporates, which has been contracting since February 2017 on an annual basis, remained depressed, contracting by 0.7% m/m and 7.7% y/y in July.

The overall liquidity position of commercial banks declined by N$1.2 billion to reach an average of N$3.25 billion. The Bank of Namibia (BoN) attributes the decline in liquidity balances to outflows as a result of payments of corporate taxes during the period under review. The decreased liquidity resulted in an increase in the use of the BoN’s repo facility by commercial banks, with the outstanding balance of repo’s increasing from N$388.7 million at the start of July to N$391.5 million by month end.

As per the BoN’s latest money statistics release, broad money supply rose by N$6.74 billion or 6.6% y/y in July, following a 7.3% y/y increase in June. Foreign reserve balances rose by N$1.75 billion to N$35.2 billion in July from N$33.4 billion in June. According to BoN this was largely due to SACU payments received during the month under review.

Private sector credit extension growth increased as at the end of July by 7.40% y/y. From a 12-month rolling perspective, credit issuance is up 25.6% from the N$5.5 billion issuance observed at the end of July 2018, with individuals taking up most (58.6%) of the credit extended over the past 12 months. Most of the growth in PSCE for July stemmed from other financial corporations and mortgages extended to individuals.

Corporates increased their demand for overdraft facilities on a year-year basis. The uptake of overdrafts is an indication of lack of liquidity in the fisheries and construction industries to finance working capital in the short-term. Our expectation is for private sector credit extension to remain under pressure as both consumer and business confidence remains low.

As we expected the BoN took the decision to cut the Repo rate by 25 basis points at its August MPC meeting. This should bring heavily indebted consumers and corporates some relief. However, interest rates remain accommodative by historical standards and further rate cuts are unlikely to result in a meaningful increase in the uptake of credit.

NCPI – July 2019

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The Namibian annual inflation rate slowed to 3.6% y/y in July, following the 3.9% y/y increase in prices recorded in June. Prices increased by 0.2% m/m, compared to the overall basket price increase of 0.1% m/m in June. Overall, prices in six of the basket categories rose at a faster annual rate than in July, prices in five categories rose at a slower annual rate and one category recorded steady inflation rates. Prices for goods rose by 3.1% y/y while prices for services rose by 4.4%.

Transport accounted for 0.9% of the total 3.6% annual inflation recorded in July, making it the largest contributor to annual inflation for the month. Prices for the transport basket rose 0.5% m/m and 6.9% y/y during the month. The purchase of vehicles subcategory saw price increases of 0.6% m/m and 3.6% y/y in July, while the operation of transport equipment subcategory recorded price increases of 0.7% m/m and 4.9% y/y. Although global oil prices have declined in the last few months, the Ministry of Mines and Energy decided to keep fuel pump prices unchanged for July in order to strengthen its financial capacity to subsidise possible under-recoveries in future.

The Housing and utilities category, the largest weighting in the CPI basket, was the second largest contributor to annual inflation, accounting for 0.6% of the 3.6% annual inflation rate. Housing and utility costs increased by 1.0% m/m and 2.2% y/y. The upward movement on a month-on-month basis resulted from an increase in prices for the electricity, gas and other fuels sub-component. Prices of this subcategory rose 5.6% m/m and 1.6% y/y. Water supply, sewage service and refuse collection recorded an increase of 2.2% m/m as a result of the 5% increase in water tariffs effective from 1 July 2019, announced by the City of Windhoek.

Food & non-alcoholic beverages, the second largest basket item by weighting, was the third largest contributor to annual inflation, accounting for 0.6% of the 3.6% annual inflation rate. Prices in this category decreased by 0.6% m/m, but increased by 3.4% y/y. Prices in nine of the thirteen sub-categories recorded increases on annual basis, with the largest increases being observed in the prices of fruits, sugar and confectionaries and vegetables.

Zonal data shows that on a monthly basis prices declined by 0.1% in the central zone 2 while rising elsewhere in the country. On an annual basis the Windhoek and surrounding area, in zone 2, recorded the lowest inflation rate at 3.0% in July, with the mixed zone 3 covering the south, east and west of the country recording the highest rate of inflation at 5.1% y/y. Inflation in zone 1 (Northern region) moderated to 3.2% y/y.

The Namibian annual inflation rate of 3.6% y/y continues trending lower than neighbouring South Africa’s June figure of 4.5%. As the Namibian economy is projected to remain weak in 2019, coupled with slowing inflation since the beginning of the year, the Bank of Namibia (BoN) has this week taken the decision to cut the repo rate by 25 basis points to 6.50%. IJG’s inflation model forecasts an average inflation of 3.8% y/y in 2019. The largest upside risk to this forecast is higher transport and food costs.

New Vehicle Sales – July 2019

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A total of 904 new vehicles were sold in July, representing a 7.5% m/m decrease from the 977 vehicles sold in June. Year-to-date, 6,227 vehicles have been sold of which 2,854 were passenger vehicles, 2,969 were light commercial vehicles, and 404 were medium and heavy commercial vehicles. On an annual basis, twelve-month cumulative new vehicle sale continued on a downward trend, contracting by 7.5% from the 11,119 new vehicles sold over the comparable period a year ago.

382 New passenger vehicles were sold in July, increasing by 1.1% m/m, but contracting by 37.2% y/y. Year-to-date passenger vehicle sales rose to 2,854 units, down 11.1% when compared to the year-to-date figure recorded in July 2018. On an annual basis, twelve-month cumulative passenger vehicle sales fell 4.6% m/m and 8.9% y/y as figures continue to reflect weakness in the number of passenger vehicles sold.

A total of 522 new commercial vehicles were sold in July, representing a contraction of 12.9% m/m and 11.4% y/y. Of the 522 commercial vehicles sold in July, 435 were classified as light commercial vehicles, 37 as medium commercial vehicles and 50 as heavy or extra heavy commercial vehicles. On a twelve-month cumulative basis, light commercial vehicle sales dropped 8.8% y/y, while medium commercial vehicle sales remained flat, and heavy commercial vehicle sales rose by 28.8% y/y. While heavy commercial vehicles continue to record growth on a twelve-month cumulative basis, the light segment of the market continues to see lower volumes sold than in 2018.

Toyota once again leads the passenger vehicle sales segment with 30.9% of the segment sales year-to-date. Volkswagen dropped to second place by this measure with 30.6% of the market-share as at the end of July. Kia, Hyundai, Mercedes and Ford each command around 5.0% of the market in the passenger vehicles segment, leaving the remaining 18.9% of the market to other brands.

Toyota with a strong market share of 58.4% year-to-date commands the light commercial vehicles sales segment. Nissan remains in second position in the segment with 12.1% of the market, while Ford makes up third place with 8.5% of the year-to-date sales. Hino leads the medium commercial vehicle segment with 36.4% of sales year-to-date, while Scania was number one in the heavy- and extra-heavy commercial vehicle segment with 36.0% of the market share year-to-date.

The Bottom Line

Vehicle sales remain under pressure, with the year-to-date new vehicle sales in 2019 currently below 2011 levels, and the total new vehicle sales for the last 12 months down 7.5% from the same period in 2018. The prospects for new vehicle sales remain dim in the short- to medium-term as government remains committed to fiscal consolidation. Business and consumer confidence remain depressed as a result of the of the recessionary environment we find ourselves in.