Category Archives: Economic Research

Economic Research

Building Plans – September 2018

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A total of 153 building plans were approved by the City of Windhoek in September, decreasing by 43.1% m/m and 15.5% y/y. In value terms, approvals decreased by N$276.2 million to N$147.3 million, representing a 65.2% m/m decline, but a 26.0% y/y increase. The number of completions for the month of September stood at 240, valued at N$138.6 million. The year-to-date value of approved building plans reached N$1.6 billion, 13.8% lower than the corresponding period in 2017. On a twelve-month cumulative basis, 2,184 building plans were approved, an increase of 20.4% y/y, worth approximately N$1.94 billion, a decrease of 13.6% in value terms over the prior 12-month period.

Additions to properties made up 114 out of the total 153 approved building plans recorded in September. This is a 46.5% m/m decrease in additions from the 213 additions recorded in August. Year-to-date 1,242 additions to properties have been approved with a value of N$748.5 million, declining 9.8% y/y in terms of value.

New residential units were the second largest contributor to building plans approved, with 33 approvals registered in September, a m/m decrease of 29.8% compared to the 47 residential units approved in August. Year-to-date, 397 new residential units have been approved, 78.0% more than during the corresponding period in 2017. In value terms, N$24.7 million worth of residential units were approved in September, 73.3% less than the N$92.5 million worth of residential approvals in August. The year-to-date value of residential approvals reached N$460.2 million, 31.6% higher than during the first three quarters of 2017.

Commercial and industrial building plans approved amounted to 6 units, worth N$78.4 million for September. Year-to-date, 34 plans for commercial and industrial purposes have been approved which is two more than in the corresponding period in 2017. On a rolling 12-month perspective the number of commercial and industrial approvals have increased to 52 units worth N$414.4 million as at September, compared to the 46 approved units worth N$711.6 million over the corresponding period a year ago.

On a 12-month cumulative basis, 2,184 building plans were approved by September, an increase of 20.4% y/y. In value terms however, approvals are down 13.6% y/y over the same period. The latest private sector credit extension data showed that mortgage loans extended to corporates contracted remained flat m/m in August, but rose by 1.1% m/m for individuals.

The outlook for short to medium term growth in the construction sector remains bleak. If implemented, the proposed changes to the income tax legislation is very likely to have a negative impact on economic growth. Increasing tax rates on businesses, coupled with continued fiscal consolidation by government, means that no substantial growth in capital expenditure on expansionary projects can be expected.

NCPI – September 2018

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The Namibian annual inflation rate accelerated to 4.8% y/y in September, after moderating to 4.4% y/y in August. Notably, prices in the overall NCPI basket increased by 0.8% m/m in September compared to August where there was no overall change in the price index. On an annual basis prices in five of the twelve basket categories rose at a quicker rate in September than in August. Three categories remained unchanged, while the rate of price increases in four categories slowed for the month of September. Prices for goods increased at a rate of 4.9% y/y in September, quicker than the 4.6% y/y increase in August. Prices for services increased at a rate of 4.7% y/y following a 4.1% y/y increase in August.

Transport was once again the largest contributor to annual inflation in September, accounting for 1.7% of the total 4.8% annual inflation rate. This was largely expected considering the wave of increases in fuel pump prices seen over the last five consecutive months, including September. Transport prices increased at a rate of 3.7% m/m in September, rising much faster than the 0.8% m/m increase recorded in August. On an annual basis, the increase in transport prices has reached double digits for the first time since June 2014. Transport prices increased by 12.9% y/y in September, faster than the 9.7% y/y increase recorded in August. Prices in the three sub-categories all recorded increases on a year-on-year basis. Prices relating to the purchase of vehicles increased at a rate of 8.5% y/y, while prices relating to the operation of personal transport equipment increased by 13.3% y/y. The biggest increase was realised in the public transport services sub-category. The 20% increase in taxi fares that was approved in August came into effect in September and attributed to the 18% y/y increase for this sub-category.

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 increased by a rate of 0.3% m/m and 3.8% y/y. Prices in the electricity, gas and other fuels subcategory increased at 9% y/y, which was slower than inflation of 13.2% recorded in August. Month-on-month, prices in this subcategory increased marginally at 0.2%. The water supply, sewerage service and refuse collection subcategory prices remained unchained on a monthly basis, while the regular maintenance and repair of dwellings subcategory showed prices decreasing by 0.1% m/m.

Prices for the alcoholic beverages and tobacco category increased at a rate of 5.6% y/y and 0.8% m/m. Prices of alcoholic beverages increased at a rate of 6.3% y/y while tobacco prices increased at a rate of 2.6% y/y.

The Namibian annual inflation rate of 4.8% is closely tracking that of neighbouring South Africa (August: 4.9% y/y). Having endured sharper increases to fuel pump prices than in Namibia, SA’s annual inflation surprisingly moderated from 5.1% y/y in July. The price of Brent crude oil has been hovering above US$80 since mid-September and has come down over 5.6% from a high of US$85/bbl on the 9th of October. Oil is likely to range above US$80/bbl due to downside risks to global oil supply. The US once again faces another hurricane that will affect US production in the interim. Further exacerbating matters is US sanctions on Iranian supply while OPEC is exercising restrictive measure at the same time. These events could tilt the oil price upward, putting more pressure on fuel pump prices going forward amidst a rand that has depreciated from a September best of R14.04 to the US dollar.

The near-term outlook for the rand hinges on two major events, both scheduled for October. First up is the imminent announcement of Moody’s credit review decision, scheduled for release on the 12th of October, and thereafter the tabling of the Medium-Term Budget Policy Speech (MTBPS) on the 24th of October. Moody’s review decision comes in the same week that saw Nhlanhla Nene request that President Ramaphosa relieve him of his duties as finance minister. Former SARB governor Tito Mboweni has since been appointed has finance minister, a move welcomed by the market as shown in the firming of the rand since the change in finance ministers was brought about. Minister Mboweni will table a budget many expect will be positive in terms of expenditure remaining within set bounds, which is crucial as shortfall’s in revenue collection are expected due to the struggling economy. Moody’s had previously warned that diverting from fiscal consolidation will be seen as a credit negative, although Moody’s decision will likely precede the mid-term budget speech. Any adverse outcomes from Moody’s review decision and the MTBPS could lead to more rand weakness and subsequently accelerated inflation. This would force the SARB to hike interest rates in an attempt to contain inflation, with Bank of Namibia likely to follow suit in order to maintain the reserve position. Risks to inflation thus remain to the upside, the consequences of which could be higher interest rates and further pressure on the economy.

New Vehicle Sales – September 2018

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982 New vehicles were sold in September, which represents a 7.4% m/m decrease from the 1,061 vehicles sold in August, and a 13.4% y/y decrease from September 2017. Year-to-date 9,052 vehicles have been sold of which 3,962 were passenger vehicles, 4,607 light commercial vehicles, and 483 medium and heavy commercial vehicles. On a twelve-month cumulative basis, a total of 11,879 new vehicles were sold as at 30 September 2018, representing a contraction of 13.7% from the 13,765 sold over the comparable period a year ago.

A total of 333 new passenger vehicles were sold during September, declining by 20.9% m/m and 23.1% y/y. Year-to-date passenger vehicle sales rose to 3,962, down 8.9% when compared to the number sold by September last year. For the past three quarters, passenger vehicles have, on average, made up 43.7% of the total number of new vehicles sold.

649 New commercial vehicles were sold in September, representing a 1.4% m/m increase, but a 7.4% y/y contraction. 584 light commercial vehicles, 28 medium commercial vehicles, and 37 heavy commercial vehicles were sold during the month. On a year-on-year basis, light commercial vehicle sales have dropped by 8.8%, medium commercial sales were flat, and heavy and extra heavy sales rose by 12.1%. On a twelve-month cumulative basis, light commercial vehicle sales dropped 17.2% y/y, medium commercial vehicle sales declined by 1.6% y/y, and heavy commercial vehicle sales dropped 2.1% y/y.

Year-to-date, Toyota and Volkswagen continue to hold their market share in the passenger vehicle market based on the number of new vehicles sold, claiming 34.8% and 27.8% of the market respectively. They were followed by Hyundai at 5.8% and Kia at 4.8%, while the rest of the passenger vehicle market was shared by several competitors.

Toyota also remained the leader in the light commercial vehicles space with a robust 56.8% market share, with Nissan in second place with a 18.1% share. Ford and Isuzu claimed 8.6% and 5.1%, respectively, of the number of light commercial vehicles sold year-to-date. Hino leads the medium commercial vehicle category with 44.3% of sales while Scania remains number one in the heavy and extra-heavy commercial vehicle segment with 37.5% 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 11,879 at the end of September. Year-on-year, the 12-month cumulative number of new vehicles sold has contracted by 13.7% from the 13,765 cumulative sales recorded in September 2017. If implemented, the proposed changes to the income tax legislation is very likely to have a negative impact on economic growth, and put additional pressure on both individuals and corporates. This means that lower spending on capital assets will reduce the demand which is already under pressure for both passenger and commercial vehicles.