Category Archives: Economic Research

Economic Research

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.

PSCE – August 2018

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Overall

Private sector credit extension (PSCE) recorded it biggest monthly increase since November 2015, rising by N$1.37 billion or 1.5% m/m in August. Cumulative credit outstanding currently amounts to N$94.8 billion. PSCE growth accelerated to 7.1% y/y in August from 6.3% y/y in July. On an annual basis the growth in PSCE was driven largely by credit extended to households which increased at a quicker rate of 8.1% y/y in August compared to 6.7% y/y in July. Credit extended to corporates grew marginally quicker at 3.6% y/y in August versus the 3.4% y/y in July. On a rolling 12-month basis N$6.3 billion worth of credit was extended to the private sector with N$4.2 billion being taken up by individuals. Corporations took up only N$1.3 billion worth of credit while claims on non-residents totaled N$748 million.

Credit extension to individuals

Household appetite for credit remains high judging by credit extended to individuals over the past 12 months. Credit extended to individuals increased by 8.1% y/y in August, a sharp acceleration from the 6.7% y/y growth recorded in July. Base effects saw mortgage loans extended to individual grow by 10% y/y in August compared to the 7.7% y/y increase recorded in July, resulting in the overall acceleration mentioned above. Individuals once again made very little use of overdraft facilities in August, with this increasing by 0.8% y/y following a 1.7% y/y contraction recorded in July. Household appetite for instalment credit remains subdued as reflected in the contractions of 5.6% y/y and 0.6% m/m in August. Other loans and advances grew by 17.2% y/y and 3.5% m/m in August.

Credit extension to corporates

Credit extension to corporates grew by 3.6% y/y and 2.4% m/m. On a rolling 12-month basis N$1.3 billion was extended to corporates as at the end of August compared to N$1.2 billion as at the end of July. Instalment credit extended to corporates contracted by 7.5% y/y but increased marginally by 0.5% m/m in August. Leasing transactions to corporations also contracted in August, by 3.6% y/y and 3.1% m/m. The contraction in instalment credit and lease transactions points towards declining corporate investments of a capital nature. However, the uptick in loans and overdrafts of 22.1% y/y and 1.5% y/y, respectively, could suggest that businesses are lending simply to stay afloat.

Banking Sector Liquidity

The overall liquidity position of commercial banks decreased by N$229.7 million to an average of N$4.5 billion during August from N$4.7 billion in July. The overall liquidity position continued to boast a healthy average monthly balance of above N$4 billion since June. The excess liquidity seems to have found some parking space with Bank of Namibia (BoN) attributing the decrease in overall liquidity to an uptick in the purchases of BoN bills over the month of August. At the same time commercial banks have continued to utilize BoN’s repo facility, with the balance of repo’s outstanding increasing from N$341 million at the start of August to N$386 million as at the end of August.

Reserves and money supply

Foreign reserve balances decreased by N$345 million to N$32.2 billion in August from N$32.5 billion in July. BoN had previously noted that the July balance of foreign reserves was N$30.8 billion, citing errors to March reserve figures. This has since been corrected along with the balances of the preceding three months. The N$345 million decline in reserves, however, BoN attributes to government disbursements over the month under review.

Outlook

Credit extension to individuals continues to outpace extension to corporates by most measures. However, the monthly uptick in PSCE registered in August was largely due to credit extension to corporates, which was almost double credit extension to individuals. The outlook for PSCE growth, for the time being, is rested on interest rate expectations with the SARB MPC keeping policy rates unchanged in September, with expectations for BoN’s MPC to follow suit. Rising oil prices and a weaker rand has seen a rampant increase to fuel pump prices, which will feed into the SARB’s inflation forecast. These factors will weigh on future interest rate decisions which in turn influences the rate of PSCE growth. Interest rates remain broadly accommodative at present but risks remain to the upside.

Notwithstanding global developments, local government fiscal shortages bear further risk to the outlook for PSCE. Local news media has reported that the Ministry of Finance (MoF) has engaged in consultations to discuss proposed increases to tax rates for individuals and various taxes affecting businesses. With individuals accounting for almost 70% of the credit issued from a 12-month cumulative perspective, any increase in tax impacts the ability of credit uptake by an already stretched consumer. This would mean less demand for consumer credit, and less disposable income to service debt. This will further supress consumer spending that in turn affects capital investment by local business, which at present is already heavily suppressed. An increase in corporate taxes (dividend withholding tax) further disincentivises credit uptake by corporates which could delay expansion of operations which further dampens the outlook for PSCE going forward.

New Vehicle Sales – August 2018

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A total of 1,061 new vehicles were sold in August, representing an 11.0% m/m decrease from the 1,192 vehicles sold in July, but 1.7% more than in August 2017. Year-to-date 8,070 vehicles have been sold of which 3,629 were passenger vehicles, 4,023 light commercial vehicles, and 418 medium and heavy commercial vehicles. On a rolling 12-month basis, a total of 12,031 new vehicles were sold as at 31 August 2018, representing a contraction of 13.1% from the 13,848 sold over the comparable period a year ago.

A total of 421 new passenger vehicles were sold during August, decreasing by a hefty 30.4% m/m. From a year-on-year perspective however, 39 more units were sold in August 2018 (up 10.2%) than a year ago. Year-to-date passenger vehicle sales rose to 3,629 units, reflecting a 7.3% decline from August 2017.

640 New commercial vehicles were sold in August, representing a 9.0% m/m increase, but a 3.2% y/y contraction. 552 light commercial vehicles, 17 medium commercial vehicles, and 71 heavy commercial vehicles were sold during the month. On a year-on-year basis, light commercial vehicle sales have dropped by 10.2%, medium commercial sales increased 41.7% and heavy and extra heavy sales rose by 108.8%. On a twelve-month cumulative basis, commercial vehicle sales remain depressed with light commercial vehicle sales decreasing by 16.9% y/y, medium commercial vehicle sales declining by 0.8% y/y and heavy commercial vehicle sales dropping by 4.8% y/y.

Toyota continues to lead the market for new passenger vehicles sales in 2018 based on the number of new vehicles sold, claiming 35.5% of the market, followed by Volkswagen with a 28.0% share. They were followed by Hyundai and Kia at 5.5% and 4.7% respectively.

Toyota also remained the leader in the light commercial vehicle space with 57.5% market share, with Nissan in second place with a 16.5% share. Ford and Isuzu claimed 9.0% and 5.3% respectively of the number of new light commercial vehicles sold for the year. Hino leads the medium commercial vehicle category with 42.7% of sales while Scania remains number one in the heavy and extra-heavy commercial vehicle segment with 36.6% of the market share year-to-date.

The Bottom Line

The outlook for new vehicle sales remains bleak with the cumulative number of new vehicle sales as at the end of August amounting to 12,031, a decline of 47.0% from the peak of 22,664 new vehicle sales recorded in April 2015. Year-on-year, the cumulative number of new vehicles sold has contracted by 13.1% from the 13,848 cumulative sales recorded in August 2017. Factors such as fiscal consolidation, low consumer and business confidence, expected fuel price increases, coupled with an increasing likelihood of interest hikes over the next 24 months, mean that no significant recovery in vehicle sales can be expected over the short to medium-term.