Category Archives: Economic Research

Economic Research

PSCE – November 2018

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Overall

Private sector credit extension (PSCE) rose by N$751 million or 0.8% m/m in November, compared to the N$585 million or 0.6% m/m increase recorded in October. Year-on-Year, PSCE grew by almost 8.0% in November compared to 7.8% y/y in October. November has also been the fourth consecutive month in which PSCE growth has kept rising on a year-on-year basis. Cumulative private sector credit outstanding as at the end of November amounted to N$96.645 billion. On an annual basis, households were taking up much of the credit extended to the private sector in 2018, accounting for almost two-thirds of the uptake. However, that wide disproportion between credit extended to households and corporations began to narrow in August. On a rolling 12-month basis N$7.126 billion worth of credit was extended to the private sector with N$3.26 billion being taken up by households. Corporations very nearly equaled that which was extended to households by taking up N$3.21 billion worth of the credit over the last 12-months, while claims on non-residents totaled N$663.2 million.

Credit extension to individuals

Credit extended to individuals increased by 6.1% y/y in November, moderating from the 7.0% y/y increase recorded in October. The year-on-year slowdown in household credit extension was due to moderating growth in mortgages, overdrafts, installment credit and other claims. Mortgage loans increased by 6.9% compared to 8.0% a year ago, while overdrafts increased by just 0.9% versus 8.5% in the prior year. Installment credit contracted by 6.8%, worse than the 2.6% contraction registered during the corresponding period in 2017. On a monthly basis, household credit growth printed flat following a modest increase of 0.7% m/m recorded in October. Mortgage credit contracted by 0.3% m/m along with a 0.9% contraction in installment credit. Other loans and advances increased by 2.1% m/m followed by a 0.4% m/m increase in overdrafts. Leasing transactions increased the most in the household’s category, 14% m/m, although significantly slower than the 70.3% m/m growth registered in October.

Credit extension to corporates

Credit extension to corporates increased by 8.9% y/y compared to October’s 7.1% y/y increase. The November increase in corporate credit has been the highest since March 2017 and the fifth consecutive month in which corporate credit has been increasing at a faster pace on a year-on-year basis. Shorter-term credit facilities continue to be driving the increase in corporate credit extension. Other loans and advances increased by 28.2% y/y and overdrafts increased by 18.5% y/y. Mortgage loans to businesses increased by 5.6% y/y in November, slowing from the 8.5% y/y increased recorded the corresponding period in 2017. On a monthly basis credit extended to businesses was the main reason for the overall increase in PSCE. Corporates made use of overdraft facilities in November, increasing overdraft loans by 8.9% m/m, followed by corporate mortgage lending which increased by 4.9% m/m.

Banking Sector Liquidity

The overall liquidity position of commercial banks declined by N$1.1 billion to reach an average of N$2.3 billion during November from N$3.4 billion in October. Bank of Namibia attributes the decline in liquidity to foreign currency outflows as a result of trade-related payments.

Reserves and money supply

As per BoN latest money statistics release, broad money supply increased by N$7.24 billion or 7.4% y/y in November but decreasing 1.7% m/m by N$1.87 billion. Foreign reserve balances declined by N$1.56 billion to N$29.5 billion in November from N$31.1 billion in October, representing a 5.0% m/m fall in reserves. BoN attributes the decline in reserves to net capital outflows from commercial banks to fund foreign currency purchases, in addition to an interest payment for the US$500 million Eurobond. A stronger Namibian dollar versus the US dollar during the period under review further contributed to the decline in foreign reserves.

Outlook

Overall PSCE growth in November maintained its upward momentum on a year-on-year basis for a fourth consecutive month, increasing by 7.96% y/y. The highest rate of growth in the last 18 months. The year 2018, with the omission of pending December PSCE data, has seen very little deleveraging from both consumers and businesses. In the midst of recessionary economic growth short-term and unsecured loans have grown at a quicker rate than that of mortgage and instalment credit. From a 12-month rolling perspective household demand for credit underpinned growth in PSCE and only until recently have businesses started borrowing more. The increase in corporate credit, however, has been more profound in short-term borrowings.

The Bank of Namibia (BoN) has been accommodative in terms of monetary policy by keeping the repo rate steady at 6.75% since cutting by 25bps in August 2017. How long BoN manages to keep interest rates steady will depend largely on developments in South Africa. The SARB will closely monitor inflation, which ticked up to 5.2% y/y and is expected to moderate on the back of falling oil prices and moderating transport inflation. Furthermore, the SA economy broke out of a recession and the outlook for possible rate hikes is now pushed towards the latter part of 2019. Domestically, BoN will be weary of worsening economic conditions, projecting weaker growth in its December Economic Update. BoN expects the Namibia economy to contract by 0.2% in 2018 followed by growth of 1.5% in 2019, a downward revision from its 1.9% estimation in July 2018 and more than half of the 3.1% it estimated in December 2017.

New Vehicle Sales – November 2018

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A total of 1,185 new vehicles were sold in November, representing a 30.9% m/m increase from the 905 vehicles sold in October, and a 17.3% y/y increase from the 1,010 new vehicles sold in November 2017. Year-to-date 11,143 vehicles have been sold of which 4,755 were passenger vehicles, 5,765 light commercial vehicles, and 623 medium and heavy commercial vehicles. On a twelve-month cumulative basis, a total of 11,969 new vehicles were sold as at 30 November 2018, representing a contraction of 9.9% from the 13,279 sold over the comparable period a year ago.

A total of 394 new passenger vehicles were sold during November, a decrease of 1.3% m/m and 1.0% y/y from the 398 passenger vehicles sold in November 2017. Year-to-date passenger vehicle sales amounted to 4,755, down 7.7% compared to the number of new passenger vehicles sold by November last year. The rolling 12-month vehicles sales figures continue to reflect weakness in the number of passenger vehicles sold, declining 8.1% y/y as at November 2018.

791 New commercial vehicles were sold in November, representing a 56.3% m/m and 29.2% y/y increase. 716 light commercial vehicles, 20 medium commercial vehicles, and 55 heavy commercial vehicles were sold during the month. On a year-on-year basis, light commercial sales rose by 33.1%, medium commercial sales decreased 20.0% and heavy and extra heavy sales rose by 12.2%. On a twelve-month cumulative basis, light commercial vehicle sales dropped 12.4% y/y, while medium commercial vehicle sales rose 1.7% y/y, and heavy commercial vehicle sales rose 1.9% y/y.

Toyota continues to lead the market for new passenger vehicle sales in 2018 based on the number of new vehicles sold, claiming 33.8% of the market, followed by Volkswagen with a 28.6% share. They were followed by Hyundai and Kia at 5.7% and 4.9%, while the rest of the passenger vehicle market was shared by several other competitors.

Toyota also remained the leader in the light commercial vehicle space with 56.1% market share, with Nissan in second place with a 19.5% share. Ford and Isuzu claimed 8.0% and 4.9% respectively of the number of new light commercial vehicles sold for the year. Hino leads the medium commercial vehicle category with 40.9% of sales while Scania remains number one in the heavy and extra-heavy commercial vehicle segment with 35.6% of the market share year-to-date.

The Bottom Line

The cumulative number of new vehicle sales continued to contract on a 12-month basis, amounting to 11,143 at the end of November. Year-on-year, the 12-month cumulative number of new vehicles sold has contracted by 9.9% from the 11,969 cumulative sales recorded in November 2017. The prospects for new vehicle sales remain dim in the short- to medium-term as government remains committed to fiscal consolidation. Instalment credit, which is mainly used to finance vehicle purchases, continues its contracting trend, declining by 6.9% y/y at the end of October, a further indication that new vehicle sales are likely to remain subdued going forward.

NCPI – November 2018

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The Namibian annual inflation rate accelerated to 5.6% y/y in November, following the 5.1% y/y increase in prices recorded in October. Prices increased by 0.7% m/m, up from the 0.4% increase recorded in October. On an annual basis prices in five of the basket categories rose at a quicker rate in November than in October, three remained unchanged, while four categories saw lower rates of price increases. Prices for goods increased by 6.1% y/y while prices for services increased by 4.8% y/y. The increase in prices for services was unchanged from the increase recorded in October, while goods inflation accelerated on a monthly basis.

Transport, the third largest basket item, was once again the largest contributor to annual inflation, accounting for 1.8% of the total 5.6% annual inflation rate. Transport prices increased by 1.9% m/m and 13.8% y/y in November, up from the 1.2% m/m and 13.6% y/y increases seen in October. Prices in the three sub-categories all recorded increases on a year-on-year basis. Prices related to the operation of personal transport equipment increased by 15.4% y/y in November, compared to the 15.5% y/y increase recorded in the preceding month. The price of petrol increased by 50 cents per litre in November, while the price of diesel went up by 70 cents per litre, contributing to the jump in the overall category. Prices relating to the purchase of vehicles increased at a rate of 6.9% y/y, while prices related to public transportation services increased by 18.2% y/y.

The Ministry of Mines and Energy has since decreased fuel pump prices of unleaded and diesel by 100 cents per litre and 40 cents per litre, respectively. This should provide some relieve to consumers after a series of fuel price increases this year.

The Housing and utilities category was the second largest contributor to annual inflation due to its large weighting in the basket. Prices for this category remained flat m/m for a third month running and increased 3.7% y/y. Prices in the electricity, gas and other fuels subcategory increased 8.7% y/y, slightly slower than inflation of 9.0% recorded in October. The regular maintenance and repair of dwellings subcategory recorded an increase in prices of 3.5% y/y, which is a marginally slower rate of increase than the 3.7% y/y registered in the previous month. Month-on-month, prices of all the subcategories remained relatively unchanged.

Food and non-alcoholic beverages accounted for 0.8% of the total 5.6% annual inflation rate. Prices in this category rose by 4.7% y/y, faster than the 3.0% recorded in October. Prices for vegetables and fruit increased by 8.9% y/y and 7.9% y/y, respectively. Bread and cereal prices rose 6.0% y/y. Prices of food and non-alcoholic beverages accelerated at a faster pace on both monthly and annual basis. The second-round effects caused by the rampant and continuous increases in transport inflation seems to be filtering through to food prices. This is likely to persist in the very near-term, although recent fuel pump price cuts could moderate this slightly.

The Namibian annual inflation rate of 5.6% is currently trending somewhat higher than neighbouring South Africa’s November figure of 5.2%. The Bank of Namibia’s MPC decided to leave the repo rate unchanged at its meeting last week, deviating from the SARB’s decision last month to hike interest rates by 25 basis points. The BoN stated that the recent declines in fuel prices suggest that the risk of further upward pressure on inflation from this source has been reduced considerably. The BoN further mentioned that at the current level, the stock of international reserves is sufficient to protect the currency peg of the Namibian Dollar to the Rand.

As mentioned in our October 2018 PSCE review, our expectations are for interest rates to remain accommodative in the near-term. However, the BoN will be mindful of possible increases in SA rates and move to adjust local rates accordingly. Higher interest rates in SA will very likely lead to capital outflows from Namibia, which in turn jeopardises foreign reserve levels, and therefore the currency peg.