Category Archives: Economic Research

Economic Research

PSCE – March 2019

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Overall

Total credit extended to the private sector (PSCE) decreased by N$4.3 million from a revised N$97.984 billion cumulative credit outstanding in February to N$97.979 billion in March. This is the first time since June 2017 that we have seen a month-on-month contraction in credit extension. On a year-on-year basis, private sector credit extension grew by 5.79% in March, compared to 6.93% recorded in February. N$2.05 billion worth of credit has been extended to corporates and N$3.42 billion to individuals on a 12-month cumulative basis, while the non-resident private sector has decreased their borrowings by N$112.9 million.

Credit Extension to Individuals

Growth in credit extension to individuals moderated to 0.1% m/m and 6.3% y/y, compared to 7.0% y/y growth recorded in February. Installment credit remained depressed, contracting by 0.6% m/m and 5.2% y/y. Individuals started to repay their overdrafts, resulting in a decline of 1.4% m/m, but increase of 5.0% y/y. Growth in mortgage loans remained at a similar rate as in February, increasing by 0.4% m/m and 7.2% y/y. Other loans and advances recorded growth of 2.9% m/m and 20.4% y/y.

Credit Extension to Corporates

Credit extended to corporates contracted by 0.2% m/m in March after increasing by 1.0% m/m in February. On an annual basis credit extension to corporates increased by 5.5% y/y in March. The month-on-month contraction is mostly caused by businesses paying back overdrafts. Overdraft facilities extended to corporates decreased by 7.5% m/m, but increased by 2.0% y/y. Mortgage loans to corporates contracted by 1.8% m/m, but increased 2.9% y/y. Installment credit extended to corporates, which has been contracting since February 2017 on an annual basis, remained depressed, contracting by 0.6% m/m and 9.1% y/y in March.

Banking Sector Liquidity

The overall liquidity position of commercial banks improved during March, increasing by N$1.74 billion to reach an average of N$4.11 billion. According to the Bank of Namibia (BoN), the increase is attributable to increased mineral sales proceeds as well as higher government expenditure which, it says, is customary towards the end of a fiscal year. The higher 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$645.7 million at the start of March to N$479.3 million by month end.

Reserves and Money Supply

As per the BoN’s latest money statistics release, broad money supply rose by N$6.74 billion or 6.9% y/y in March following a 10.5% y/y increase in February. Foreign reserve balances rose by 3.0% m/m to N$32.6 billion in March. The BoN stated the increase is solely due to the depreciation of the Namibian dollar against the US dollar. The Namibian dollar depreciated by 3.0% against the US dollar during March reaching N$14.50/US$ at the end of the month. The rand (and subsequently the Namibian dollar) has been relatively volatile since May 2018 as a result of rising interest rates in the US, political uncertainty in South Africa caused by the upcoming election, and continuous bailouts of SOE’s by the South African government.

Outlook

Private sector credit extension remained depressed at the end of March, increasing by only 5.8%, with annualised growth slowing for a fourth consecutive month. From a 12-month rolling perspective, credit issuance is down 0.3% from the N$5.37 billion issuance observed at the end of March 2018, with individuals taking up most (63.9%) of the credit extended over the past 12 months.

Both individuals and corporates have started repaying overdraft facilities during the month, resulting in a 6.0% decrease in total overdrafts. As we have stated in the past, short-term borrowing satisfies short-term needs and as such, the repayment of overdrafts is a positive sign in our view as extension of overdraft facilities was unlikely to drive meaningful expansion of productive capacity.

New Vehicle Sales – March 2019

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A total of 936 new vehicles were sold in March, representing a 24.6% m/m increase from the 751 vehicles sold in February. It should be noted that March vehicle sales have a seasonal effect of being slightly higher due to it being the end of the tax year. Year-to-date, 2,365 vehicles have been sold of which 1,118 were passenger vehicles, 1,135 light commercial vehicles, and 112 medium and heavy commercial vehicles. This is a 20.8% decline in the total number of new vehicles sold during the first quarter of 2019 when compared to 2018. On a twelve month-cumulative basis, vehicle sales continue to wane with a total of 11,285 new vehicles sold as at March 2019, down 10.3% from the 12,577 sold over the comparable period a year ago, and the lowest since November 2010.

422 New passenger vehicles were sold during March, increasing by 19.2% m/m. From a year-on-year perspective however, March new passenger vehicle sales were 16.8% lower than the 507 units sold in March 2018. Year-to-date, passenger vehicle sales rose to 1,118, reflecting lower annual sales than the preceding 8 years, and a 20.9% decline from the first quarter of 2018.

A total of 514 new commercial vehicles were sold in March, representing an increase of 29.5% m/m, but a contraction of 14.8% y/y. Of the 514 commercial vehicles sold in March, 483 were classified as light, 15 as medium and 16 as heavy. On an annual basis, light commercial sales fell by 12.8%, medium commercial sales grew by 7.1% while heavy and extra heavy sales have contracted by 54.3%. On a twelve-month cumulative basis, light commercial vehicle sales dropped 11.7% y/y, while medium commercial vehicle sales rose 13.1% y/y, and heavy commercial vehicle sales fell 6.3% y/y. This is the sixth consecutive month that medium commercial sales have showed growth on a twelve-month cumulative basis.

Toyota retook the lead from Volkswagen in March in terms of year-to-date market share of new passenger vehicles sold. Toyota claimed 31.6% of the market, followed closely by Volkswagen with 28.3% of the market. They were followed by Kia and Hyundai with 5.9% and 5.5% of the market respectively, while the rest of the passenger vehicle market was shared by several other competitors.

Toyota remained the leader in the light commercial vehicle space with a 67.8% market share, with Ford in second place with a 9.8% market share. Volkswagen and Isuzu claimed 5.3% and 4.5%, respectively, of the number of light commercial vehicles sold thus far in 2019. Hino leads the medium commercial vehicle segment with 37.2% of sales while Scania was number one in the heavy and extra-heavy commercial vehicle segment with 29.0% of the market share year-to-date.

The Bottom Line

New vehicle sales remained depressed in March as 12-month cumulative new vehicle sales have declined by 10.3% y/y to 11,285 at the end of March, representing a decline of 50.2% from the peak of 22,664 new vehicle sales recorded in April 2015. Government’s continued commitment to fiscal consolidation does have a direct effect on the demand for new vehicles. Government vehicle expenditure has fallen from N$1.02 billion in the 2014/15 fiscal year to N$22.2 million in 2017/18. In his Budget Review Speech last month, finance minister Calle Schlettwein left the revised vehicle budget unchanged at N$11.9 million from the mid-term budget tabled in October last year. N$1.4 million is allocated to the Auditor General’s office for vehicles, N$10.0 million to Health and Social Services and N$500,000 to the Justice ministry. For the 2019/20 year, N$10.0 million is allocated to Health and Social Services for vehicles. These figures dim the prospects for new vehicle sales in the short- to medium-term.