Category Archives: Economic Research

Economic Research

New Vehicle Sales – February 2018

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A total of 1,039 new vehicles were sold in February, which represents an 18.1% m/m increase from the 881 sold in January. This is however 10.0% lower than the 1,155 new vehicles sold in February 2017. Two months into 2018, 1,919 new vehicles have been sold of which 939 were passenger vehicles, 915 light commercial and 65 medium and heavy commercial vehicles. This is a 6.3% decline in the total number of new vehicles sold during the first two months of 2018 when compared to 2017. From a rolling 12-month basis the statistics look even worse, a total of 13,071 new vehicles were sold as at February 2018 representing a contraction of 17.7% from the 15,873 sold over the comparable period a year ago.

A total 513 new passenger vehicles were sold during February, taking cue from January’s month on month improvement and increasing by 20.4% m/m. From a year on year perspective however, February 2018 new vehicle sales were 15 units lower than the 528 sold a year ago. The rolling 12-month vehicles sales continue to reflect weakness in the number of passenger vehicles sold, declining 16.3% as at February 2018. For the past 12 months, passenger vehicles have, on average, made up 43.0% of the total number of new vehicles sold.

526 Commercial vehicles were sold in February, representing a 15.9% m/m and 16.1% y/y contraction. 488 light commercial vehicles, 19 medium commercial vehicles, and 19 heavy commercial vehicles were sold in February. On a year on year basis light commercial sales have declined by 15.4%, medium commercial sales contracted 5.0% and heavy and extra heavy sales have declined by a hefty 36.7%.

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 37.0% and 27.0% of the market respectively. They were followed by Mercedes at 5.2% and Ford at 5.0%, while the rest of the passenger vehicle market was shared by several competitors.

Toyota also remained the leader in the light commercial vehicle space with a 58.0% market share with Nissan in second place with a 14.0% share. Ford and Isuzu claimed 7.8% and 6.6%, respectively, of the number of light commercial vehicles sold so far in 2018, swapping places they held for the same period in 2017. In the heavy category, Hino and Mercedes started have thus far sold 7 heavy or extra heavy vehicles each representing 22.0% of the number of heavy commercial vehicles sold this year.

The Bottom Line

Cumulative new vehicle sales continue its downward trend in February, the reduction in government spending does have a direct effect on the demand for new vehicles. Government’s commitment to fiscal consolidation in the current recessionary environment dims prospects for new vehicle sales in 2018. Individuals are purchasing almost as many units as corporates and this is worrying in that corporates are not investing in capital goods, which is an indication of the weakened business confidence carried forward from 2017. Tighter credit controls introduced in March 2017 have limited demand for vehicle finance. Consumers currently account for almost 90% of the private sector credit issuance and are heavily indebted. Given that individuals make up almost half of the total vehicles purchased and with corporates buying less and less vehicles, the slowdown in new vehicle sales is very likely to continue well into 2018.

PSCE – January 2018

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Overall

Private sector credit extension (PSCE) increased by N$344.0 million or 0.38% m/m in January, bringing the cumulative credit outstanding at the end of 2017 to N$90.6 billion. On a y/y basis, private sector credit extension increased by 5.0% in January, slower when compared to the 5.2% y/y growth recorded in December. From a rolling 12-month basis, N$4.3 billion worth of credit was extended to the private sector, with individuals stacking up N$3.6 billion worth of debt while N$596 million was extended to corporates. Claims on non-resident private sector credit increased by N$119.3 million y/y.

Credit extension to households

 Credit extended to households increased by 7.2% y/y in January and on a m/m basis, household credit extension rose by 0.5% in January. The month on month increase in household debt can attributed to the increase in overdraft facilities of 3.8% or N$115.8 million in January, following a contraction of 1.4% in December. Installment credit remains depressed, contracting by 2.5% y/y and 0.4% m/m. Fewer consumer discretionary income is being directed towards installment credit, which is the largely used in financing vehicle purchases. Depresses consumer confidence and tighter credit controls imposed on vehicle financing have been the main driver of the decline in new vehicle sales. The Cumulative 12-month vehicle sales have declined by 17.8% y/y. The value of mortgage loans extended to individuals have by 7.7% y/y and 0.2% m/m.

Credit extension to corporates

Credit extension to corporates increased by 0.3% m/m in January, slower than the 0.8% m/m increase in December. Year on year credit extension to corporates grew 1.7% in January, one percent slower than the increase in growth from the 2.7% y/y in December. Installment credit extended to corporates, which has been contracting since February 2017 on an annual basis remained depressed, contracting by 7.9% y/y in January. Leasing transactions to corporations contracted further in January by 7.6% y/y following the 17.2% y/y decline in December. Overdraft facilities extended to corporates increased by 5.3% m/m and 4.8% y/y.

Banking Sector Liquidity

The overall liquidity position of commercial banks declined by N$1.2 million from N$3.1 billion in December to N$1.9 billion in January. The decrease in the liquidity position is attributed to periodic corporate tax payments made to Inland Revenue in January. BoN’s repo facility has been utilized consistently since mid-December and although average repos decreased from N$726 million in December to N$644 million for January, the use of the facility is an indication that commercial banks are facing challenges in terms of liquidity.

Reserves and money supply

Foreign reserves declined by N$1.3 billion, bringing down reserve levels to N$28.3 billion in January from N$29.7 billion in December. According to the Bank of Namibia the decline in reserves is attributed to the maturities of foreign currency denominated debt that matured in January.

 

Outlook

 Private sector credit extension growth had slowed markedly in 2017. PSCE continues to slow at the start of 2018 taking its cue from 2017 as a result of lower demand for credit and lower supply thereof.  The introduction of the new provisions a directed by IFRS9, with regards to the calculation of credit impairments is set to have a significant effect on the availability of credit this year. Stagnant interest rates have not provided consumers or business the much-desired relief, following only one rate cut in August last year. Moody’s decision on SA’s local and foreign currency rating is set for the end of March, with the SARB very likely to hold off any change in interest rates until that decision is made known. The positive change in leadership in SA, and the positives from last months budget provide for optimism that SA might stave off a ratings downgrade from Moody’s. SA surviving a credit ratings downgrade coupled with moderating inflation might well open the door for the SARB to cut rates and for the BoN to in follow in similar fashion.