Category Archives: Economic Research

Economic Research

PSCE – March 2018

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Overall

Private sector credit extension (PSCE) increased by N$724.8 million or 0.8% m/m in March, bringing the cumulative credit outstanding to N$92.4 billion. On a year-on-year basis, private sector credit extension increased by 5.9% in March, increasing at a slightly quicker rate than the 5.1% recorded in February. From a rolling 12-month basis, N$5.1 billion worth of credit was extended to the private sector, compare to the previous year, the rolling 12-month issuance is down 25.4% from the N$6.8 billion observed at the end of March 2017. Of this cumulative issuance, individuals took up credit worth N$3.5 billion while N$757.9 million was issued to corporates. Claims on non-resident private sectors increased by an immense N$827.3 million, or 190.3%, y/y.

Credit extension to households

Credit extended to individuals increased by 7.0% y/y in March, on par with the year-on-year growth recorded in February. On a monthly basis, household credit extension rose by 0.2% in March which is lower than the increase of 0.6% registered in February. Installment credit extended to households contracted by 2.7% y/y. This contraction is in tandem with diminishing new vehicle sales reported for March since installment credit is largely used to finance vehicle purchases. The value of mortgage loans extended to individuals increased by 0.5% m/m and 8.1% y/y. Demand for overdraft facilities has been slowing since January on an annual basis, increasing by 2.4% y/y in March compared to 3.4% y/y in February. Overdraft facilities recorded a contraction in credit outstanding of 1.7% m/m in in March.

Credit extension to corporates

Credit extension to corporates contracted by 0.3% m/m in March after increasing by 2.0% m/m in February. On an annual basis credit extension to corporates increased 2.1% y/y in March, similar to the rate recorded in February. Mortgage loans to corporates remained flat month-on-month, but increased 5.5% y/y. Overdraft facilities extended to corporates increased by 2.5% m/m and 5.8% y/y. Installment credit extended to corporates, which has been contracting since February 2017 on an annual basis, remained depressed, contracting by 0.9% m/m and 6.7% y/y in March.

Banking Sector Liquidity

The overall liquidity position of commercial banks increased to an average of N$3.1 billion during March, an increase of N$1.2 billion compared to the preceding month. Government payments and mineral sales proceeds of about N$1.0 billion contributed to the improved liquidity position during March 2018, according to the Bank of Namibia. Commercial banks continue to utilize BoN’s repo facility, and although average repos have decreased considerably from N$603.4 million during February to N$344.5 million during March, the use of the facility suggests that some banks are facing challenges in terms of liquidity.

Reserves and money supply

The stock of foreign reserves decreased by N$94.0 million to N$26.8 billion in March, the lowest level since May last year.

Outlook

Growth in private sector credit extension remained static at the end of March. The Bank of Namibia announced in March that it would not follow the SARB’s action to cut rates by 25 basis points, as the international reserve position has deteriorated over the last few months. We feel that should the reserve position stabilise, the Bank of Namibia would ideally like to cut rates to provide some stimulus to the economy.

New Vehicle Sales – March 2018

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A total of 1,142 new vehicles were sold in March, a 9.9% m/m increase from the 1,039 vehicles sold in February. This is, however, 18.7% lower than the 1,404 new vehicles sold in March 2017. Year-to-date 3,061 vehicles have been sold of which 1,456 were passenger vehicles, 1,491 light commercial vehicles, and 114 medium and heavy commercial vehicles. This is a 11.4% decline in the total number of new vehicles sold during the first quarter of 2018 when compared to 2017. On a twelve-month cumulative basis, vehicle sales continue to wane with a total of 12,809 new vehicles sold as at March 2018, representing a contraction of 18.6% from the 15,742 sold over the comparable period a year ago.

A total of 517 new passenger vehicles were sold during March, increasing by a slight 0.8% m/m. From a year on year perspective however, March new passenger vehicle sales were 25.5% lower than the 694 units sold in March 2017.  On a rolling 12-month basis, passenger vehicle sales are at their lowest level since January 2012.

625 Commercial vehicles were sold in March, representing an increase of 18.8% m/m, but a contraction of 12.0% y/y. 576 light commercial vehicles, 14 medium commercial vehicles, and 35 heavy commercial vehicles were sold in March. On a year-on-year basis, light commercial sales have declined by 11.4%, medium commercial sales contracted by a substantial 36.4%, and heavy and extra heavy sales have declined by 7.9%. On a twelve-month cumulative basis light commercial vehicle sales continue to be depressed, contracting 20.1% y/y, while medium commercial vehicle sales contracted by 2.1% y/y and heavy commercial vehicle sales was flat on a year-on-year basis.

Toyota continues to lead the market for new passenger vehicle sales in 2018 with 37.2% of the passenger vehicle market followed by Volkswagen with a 28.2% share. They were followed by Hyundai and Mercedes, each with a 5.1% share, 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 57.6% market share with Nissan in second place with a 16.0% share. Ford and Isuzu claimed 7.7% and 6.6%, respectively, of the number of light commercial vehicles sold in the first quarter of 2018. In the heavy category, Scania have thus far sold 14 heavy or extra heavy vehicles, while Mercedes and Volvo Trucks have sold 13 vehicles each this year.

The Bottom Line

Cumulative new vehicle sales continued its declining trend in February and it seems this trend will continue well into 2018. Lower government spending, specifically on capital assets, continues to have a direct effect on the number of vehicles sold. The Bank of Namibia’s announcement last week that the MPC has decided to keep the repo rate unchanged at 6.75% means that consumers and businesses are not provided with slight cost of debt relief, and coupled with tighter credit controls introduced in March last year means that the demand for vehicle finance will in all likelihood remain limited. The continued slowdown in commercial vehicle sales remains worrisome as it is an indication of lower capital expenditure by corporates and lower business confidence in general.

Building Plans – March 2018

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A total of 129 building plans were approved by the City of Windhoek in March. This is a slight decline in the number of plans approved on a monthly basis when compared to the 134 building plans approved in February. In value terms however, approvals increased slightly by N$4.4 million to N$82.4 million in March. 91 Buildings with a value of N$100.5 million were completed during March. The year-to-date value of approved building plans currently stands at N$429.7 million, 9.4% higher than the corresponding period in 2017. On a twelve-month cumulative basis, 1,916 building plans building plans were approved, an increase of 10.1% y/y, worth approximately N$2.23 billion, an increase of 21.4% in value terms over the prior 12-month period.

Additions to properties made up 106 approvals out of the total 129 approved building plans recorded in March. Year-to-date 343 additions to properties have been approved with a value of N$324 million, rising 46.5% y/y in value terms.

New residential units were the second largest contributor to the number of building plans approved with 60 units approved year-to-date, 14 less than the corresponding period in 2017. In monetary terms, N$80.8 million worth of residential plans were approved year-to-date, 37.3% lower than the first quarter of 2017.

The number of new commercial units approved in 2018 amounted to 13, valued at N$24.9 million. This compares to 9 units valued at N$42.7 million approved over the same period in 2017. On average over the last 20 years, 14.8 commercial units valued at N$83.0 million were approved in the first quarter of the year (this value is not inflation adjusted).

From a 12-month cumulative perspective, 1,916 building plans have been approved by March, an increase of 10.8% when compared to the corresponding period in 2017. This increase is positive news as it signals an increase in private sector construction activity. The Bank of Namibia announced last week that the MPC has decided to keep the repo rate unchanged at 6.75%, thus not following the South African Reserve Bank’s decision to cut rates by 25 basis points. The domestic economy continues to languish and monetary easing was expected as a measure to stimulate the economy. A decrease in the level of international reserves determined the MPC decision at the end of the day. This decision means that consumers and businesses are not provided with slight cost of debt relief and that it is not more attractive for businesses to acquire the debt finance needed to expand and invest in capital projects.