Category Archives: Economic Research

Economic Research

Building Plans – June 2018

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A total of 234 building plans were approved by the City of Windhoek in June, which is 73 more than the 161 approvals in May. The value of building plans approved in June was N$138.4 million, an increase of 8.4% from the N$127.7 million worth of approvals in May. A total of 250 buildings with a value of N$95.8 million were completed during the month. On a year-to-date basis, 975 plans have been approved, 45 more than the 930 plans approved over the same period last year. The year-to-date value of approved building plans currently stands at N$792.3 million, which is 45.6% lower than during the first half of 2017. On a twelve-month cumulative basis, 1,968 building plans were approved worth approximately N$1.5 billion, 38.2% lower in value terms than the same measure as at the end of June 2017.

The majority of the number of building plan approvals were made up of additions to properties. Additions to properties made up 179 plans of the total 234 plans approved in June. Year-to-date, 770 additions to properties have been approved, increasing by 2% y/y but decreasing by 14.5% y/y in value terms to N$524.4 million.

New residential units were the second largest contributor to the number of building plans approved with 53 approvals registered in June, 16 more than in May. 186 new residential units were approved year-to-date, which is 28 more than the corresponding period in 2017. In dollar terms, N$225.1 million worth of residential plans have been approved year-to-date, a contraction of 20.4% when compared to the first half of last year.

2 Commercial and industrial building plans were approved in June, worth N$7.0 million. This is one fewer than in the prior month, but an increase of 128.8% m/m and a decrease of 30.0% y/y in value terms. The number of new commercial units approved thus far in 2018 amounted to 19, valued at N$42.9 million. This compares to 17 units valued at N$561.3 million approved over the same period in 2017. On a 12 month-cumulative basis, the number of commercial and industrial approvals has decreased by 13.3% y/y in June to 52 units, worth approximately N$178.9 million, a decrease of 76.1% in value terms over the prior 12-month period.

During the last 12 months 1,968 building plans have been approved, increasing by 6.5% compared to June 2017. These approvals amounted to N$1.5 billion, which is a decrease in value of 38.2% y/y. Much of this is due to a single project worth N$501 million (Wernhill expansion) included in the base period and not in the current 12-month period. The number of building plans approved, on a cumulative 12-month basis, has been steadily increasing since December 2017.

Our expectation is for the BoN to follow the SARB’s MPC decision to keep interest rates unchanged at next month’s MPC meeting. Consumers and businesses are thus unlikely to be provided with slight cost of debt relief in the near-term, meaning that it will not become more attractive for businesses to acquire the debt finance needed to expand and invest in capital projects. That said, interest rates are unlikely to be the major barrier to capital projects as they remain relatively accommodative. A larger obstacle to securing credit is that banks are weary of the construction industry at present as the balance sheets of many players in the industry are stretched. Another factor affecting the construction industry in Windhoek is the scarcity of land on which to build. We do not expect a significant improvement in the approvals and completions numbers in the short term due to the factors mentioned.

 

New Vehicle Sales – June 2018

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1,134 New vehicles were sold in June, a 23.5% m/m increase from the 918 vehicles sold in May. However on a year on year basis new vehicle sales is down 5.6% from June 2017 when 1,220 vehicles were sold. Year-to-date, 5,938 vehicles have been sold, 12.3% less than in the first half of last year, making 2018 the slowest year for car sales since 2012. Of the 5,938 vehicles sold this year, 2,668 were passenger vehicles, 3,002 were light commercial vehicles, and 268 were medium or heavy commercial vehicles. On a twelve-month cumulative basis, a total of 12,371 new vehicles were sold as at June 2018, a decrease of 14.1% from the 14,407 sold over the comparable period a year ago.

A total of 465 new passenger vehicles were sold during June, an increase of 24.3% m/m, but a drop of 10.4% y/y from the 519 passenger vehicles sold in June 2017. Year-to-date passenger vehicle sales amounted to 2,668, representing a decline of 11.9% from the first half of 2017. For the past 6 months, passenger vehicles have, on average, made up 44.9% of the total number of new vehicles sold.

Commercial vehicle sales displayed a similar trend, increasing by 23.0% m/m to 669 vehicles sold in June, but contracting by 1.9% y/y. Of the 669 commercial vehicles sold in June, 607 were classified as light, 26 as medium and 36 as heavy. On an annual basis, light commercial sales grew by 6.3%, medium commercial sales declined 7.1% while heavy and extra heavy sales have contracted by 56.6% albeit from a high base. On a twelve-month cumulative basis, commercial vehicle sales remain lackluster with light commercial vehicle sale decreasing by 14.0% y/y, medium commercial vehicle sales declining 2.8% y/y and heavy commercial vehicle sales contracting by 21.1% y/y.

Toyota continues to lead the market for new passenger vehicle sales in 2018 based on the number of new vehicles sold, claiming 37.5% of the market, followed by Volkswagen with a 27.6% share. They were followed by Hyundai and Kia at 5.4% and 4.8% respectively.

Toyota also remained the leader in the light commercial vehicle space with 60.1% market share, with Nissan in second place with a 14.1% share. Ford and Isuzu claimed 8.9% and 5.5% respectively of the number of new light commercial vehicles sold for the year. Hino leads the medium commercial vehicle category with 44.0% of sales while Scania remains number one in the heavy and extra-heavy commercial vehicle segment with 33.6% 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 12,371 at the end of June. Year-on-year, the 12-month cumulative number of new vehicles sold has contracted by 14.1% from the 14,407 cumulative sales recorded in June 2017. The year-on-year decline in new vehicle sales figures suggests that vehicle owners are holding on to the vehicles they already own or purchasing second hand and imported vehicles. The continued slowdown in commercial vehicles sales remains worrisome as it is an indication of lower capital expenditure by corporates and lower business confidence in general.

NCPI – June 2018

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The Namibian annual inflation rate edged up to 4.0% in June, following a rise in prices of 3.8% y/y recorded in May. Prices increased by 0.2% m/m. Of the twelve basket items, three saw a higher annual inflation rate than in the previous month, three remained unchanged, while six categories saw lower rates of price increases. Prices for goods increased by 3.8% y/y while prices for services increased by 4.2% y/y. The increase in prices for services was unchanged from the increase recorded in May, while goods inflation accelerated on an annual basis.

Transport, the third largest basket item, was the largest contributor to annual inflation, accounting for 1.0% of the total 4.0% annual inflation figure. Prices for transport rose 2.7% m/m and 7.2% y/y in June, up from the 0.9% m/m and 5.6% y/y figures seen in May. Prices related to the operation of personal transport equipment increased by 8.9% y/y in June, compared to the 6.2% y/y increase recorded in the preceding month. The price of both petrol and diesel increased by 60 cents per litre in June, contributing to the jump in the overall category. Price increases related to the purchases of vehicles and prices for public transportation services were relatively unchanged month-on-month and year-on-year.

The price of Brent Crude oil dropped by 6.9% on Wednesday to US$73.40 a barrel, the biggest daily decline in two years. The sell-off followed Libya’s announcement that it would boost supply by reopening four export terminals that had been closed since June. Oil prices have been volatile lately after the US has said that it would reinstate sanctions against Iran, a major producer. Wednesday’s decrease brings some relief as oil price increases has largely overshot expectations in 2018. This relief should filter through to Namibian consumers who have experienced a number of fuel price increases during the year. The decision not to increase fuel prices in July by the Ministry of Mines and Energy means that there are under-recoveries at the pumps at present. While fuel price increases towards the end of the year are expected, Wednesday’s decrease in the oil price may result in lower increases than what would otherwise be expected.

The Housing and utilities category was the second largest contributor to annual inflation, due to its large weighting in the basket. Price inflation for this category came in at 3.2% y/y, but remained relatively unchanged month-on-month. The regular maintenance and repair of dwellings subcategory recorded an increase in prices of 2.3% y/y, which is a somewhat slower rate of increase than the 2.6% y/y registered the previous month. Month-on-month, prices in this subcategory increased by 0.7%. The electricity, gas and other fuels subcategory recorded slower price increases for a third consecutive month at 4.9% y/y in June. The rest of the subcategories remained unchanged on both a monthly and annual basis.

Alcoholic beverages and tobacco, the fourth largest category, saw marginally slower price increases of 5.1% y/y and unchanged prices month-on-month. Prices of alcoholic beverages rose 5.3% y/y while tobacco prices increased by 4.1% y/y. Food inflation decelerated to 3.8% y/y in June from 3.9% y/y in May. Low food inflation, along with low rental price increases recorded in January, greatly contributed to maintaining the inflation rate at well below average levels for Namibia.

Namibian annual inflation at 4.0% has slowly been ticking up since April, and our expectations are that this trend will continue going forward. Most of June’s increase in the annual inflation figure was caused by the increase in the fuel price of 60 cents per litre. Second round effects will influence other basket items such as food in the coming months.

South African annual inflation came in at a surprising 4.4% in May, slowing somewhat from April’s reported 4.5%. The cumulative effects of increases in fuel prices and VAT was expected to push up the inflation figure.  As Namibia imports most of its inflation from South Africa, the fact that inflation remains in the lower half of the SARB’s target band is positive news for Namibian consumers given the current domestic economic challenges.