Category Archives: Economic Research

Economic Research

PSCE – November 2017

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Overall

Private sector credit extension (PSCE) increased by N$584.5 million or 0.7% m/m in November, bringing the cumulative credit outstanding to N$89.4 billion. On a y/y basis, private sector credit extension increased by 4.5% in November, slowing from the 5.1% growth recorded in October. From a rolling 12-month basis, total credit extended to the private sector has been trending downward with N$3.82 billion worth of credit extended over the last 12 months. Compared to last year, the rolling 12-month issuance is down 48% from the N$7.39 billion issuance observed at the end of November 2016. Of this cumulative issuance, individuals took up credit worth N$3.4 billion while N$468.1 million was issued to corporates. Claims on non-resident private sector credit decreased by N$92.1 million y/y.

Credit extension to households

 Credit extended to individuals increased by 6.9% y/y in November, lower than the 7.3% y/y recorded in October. On a m/m basis, household credit extension rose by 0.7% in November and is slightly higher than the increase of 0.6% registered in October. Household credit extension growth has been waning for much of 2017, with annual growth dropping below 7% now for the first time since December 2010. Installment credit contracted by 2.2% y/y. This contraction is in tandem with diminishing new vehicle sales reported for November, since installment credit is largely used to finance vehicle purchases. The value of mortgage loans extended to individuals increased by 0.8% m/m and 7.8% y/y. Demand for overdraft facilities has been slowing since July this year and increased by 8.5% y/y in November compared to 10.9% y/y in October. Other loans and advances recorded growth of 1.3% m/m and 6.5% y/y.

Credit extension to corporates

Credit extension to corporates increased marginally by 0.2% m/m in November, following a contraction in credit extended of 0.5% in October. Year on year credit extension to corporates grew 1.3% in November, slower than the 2.4% in October. Installment credit extended to corporates, which has been contracting since February 2017 on an annual basis, continued to wither, contracting by 7.2% y/y in November. Mortgage loans extended to corporates contracted by 0.1% m/m while increasing by 8.6% y/y. Overdraft facilities extended to corporates increased slightly by 0.9% m/m and 2.5% y/y.

Banking Sector Liquidity

The average monthly liquidity position of commercial banks improved by N$330 million from N$2.85 billion in October to N$3.18 billion in November. The increase in the liquidity position is attributed to increased mineral sales proceeds and maturing Bank of Namibia (BoN) bills during November.

Reserves and money supply

Foreign reserves decreased by N$3.1 billion to N$28.5 billion at the end of November from N$31.6 billion in October. According to the Bank of Namibia the decline in reserves stemmed from the foreign currency fluctuations and net commercial banks purchases of foreign currency in November.

Outlook

 Private sector credit extension for 2017, with the omission of December data, will be characterized by growth that has receded since the start of the year and provided no signs to the contrary. Weakened consumer and business confidence in the wake of a weak economy points has resulted in a low demand for credit, which has been further exacerbated by tighter credit regulations. Improved commercial bank liquidity indicates that the supply side for credit has boasted healthy loanable balances although banks have been more selective in credit issuance too. Of the total credit extended to the private sector over the last 12 months, individuals helped themselves to around 90% of the pie. Corporates had a trying year, especially those that endured slow payment from government for work done.

Inflation slowed throughout the year, providing optimism for easing monetary policy which was rewarded with only one rate cut of 25 basis points. Disappointing mid-year budget reviews in SA and Namibia which highlighted expenditure over-runs, divergence from fiscal consolidation measures and revenue shortfalls prompted downgrades from ratings agencies. The year closed with both the SARB and BoN keeping rates unchanged going into 2018. The political landscape in South Africa did provide markets with relative calm in the election of Cyril Ramaphosa as ANC president. Since this shift in power within the ruling party the rand has strengthened relative to the US dollar, though the immediate test lies in Moody’s imminent review decision on South Africa’s credit rating in February. The risk herein, should SA be downgraded, is that we could see a rate hiking cycle take effect.

New Vehicle Sales – November 2017

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1,058 New vehicles were sold in November, a decrease of 3.8% m/m and 18.1% y/y. Year-to-date 12,435 new vehicles have been sold, a 19.6% decrease from November last year. On a cumulative 12-month basis 13,486 new vehicles have been sold, the lowest level since March 2013. This represents a decline of 20.9% from November 2016 and a decline of 40.5% from the peak 12-month cumulative number of vehicles sales in April 2015. The trend of slowing vehicle sales continues unabated reflecting the pressures on corporates and individuals in the recessionary environment Namibia finds itself in.

A total of 415 new passenger vehicles were sold during November, down 8.2% m/m and 18.5% y/y. Year-to-date passenger vehicle sales rose to 5,243, reflecting lower annual sales than the preceding five years and a 18.8% decline from November 2016. On a rolling 12-month basis, passenger vehicle sales are at their lowest level since March 2012, highlighting the severity of the slowdown.

Commercial vehicle sales display the same trend, declining 20.2% year-to-date and 21.6% on a rolling 12-month basis. A total of 643 new commercial vehicles were sold in November, which were made up of 564 light-, 30 medium-, and 49 heavy and extra heavy commercial vehicles. Year to date 7,192 new commercial vehicles have been sold. On a year to date basis light commercial sales have declined by 21.1%, medium commercial sales are down 12.4% and heavy and extra heavy sales have decreased by 8.3%.

Toyota continues to lead the market for new vehicle sales in 2017 with 35.2% of the passenger vehicle market followed by Volkswagen with a 24.9% share. Toyota also remains the leader in the light commercial vehicle space with a 49.4% market share with Nissan in second place with a 16.6% share. In the medium commercial section of the market Hino leads the pack with a 36.3% market share followed by Iveco at 26.4%. The heavy and extra heavy category is dominated by Scania with 35.7% of new vehicle sales.

The Bottom Line
Cumulative vehicle sales continue to contract on a rolling 12-month basis, and year-to-date vehicle sales figures are hovering around 2013 levels. This is a consequence of the recessionary environment we find ourselves in, characterised by depressed business and consumer confidence, as well as lower government spending. Tighter credit conditions and the possibility of higher interest rates coupled with indebted consumers have also hampered new vehicle sales. The continued slowdown in commercial vehicle sales remain worrisome as this is an indication of lower capital expenditure by corporates and lower business confidence. It remains unlikely that vehicle sales will recover anytime soon as the current business environment does not show any signs of reprieve.

NCPI – November 2017

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The Namibian annual inflation rate remained at 5.2% y/y in November, unchanged from October. Prices increased by 0.3% m/m. Prices for food and non-alcoholic beverages, which has largely been the reason for the slowdown in annual inflation, continue to increase at slower pace. On a year on year basis, overall prices in three of the twelve basket categories rose at a quicker rate in November than in October, with five categories recording slower rates of inflation and four categories remained unchanged. Prices for goods increased by 3.1% y/y while prices for services increased by 8.0% y/y. This was also unchanged from the increases recorded in October.

Housing and utilities was the largest contributor to annual inflation by weighting, this is also the largest weighted basket item. This category remained flat m/m and increased 8.6% y/y, contributing 2.4% towards the annual inflation figure. Year-on-year price increases within the subcategories showed little change from those recorded in October, with one of the exceptions being price increases for electricity and other fuels of 4.6% y/y in November, up from 4.1% y/y in October. This follows fuel pump price increases in November of 40 cents per litre of petrol and 60c per litre of diesel. Prices for regular maintenance and repair of dwellings contracted by 0.1% m/m.

Transport contributes about 14% towards annual inflation, and as serves as the third largest basket item by weighting. Transport accounted for 0.8% of annual inflation in November, making it the second largest contributor this month. Prices for transport rose by 6.1% y/y, a faster increase in prices than the 4.1% y/y rise recorded in October. Prices related to the purchases of vehicles rose by 7.5% y/y in November compared to a 6.5% y/y increase in October.

The alcoholic beverages and tobacco category showed increases of 5.4% y/y and 0.3% m/m, compared to increases of 5.7% y/y and 1% m/m in October. Tobacco prices increased by 6.0% y/y, while alcohol increased at 5.3% y/y.

Namibian annual inflation, although higher than that of South Africa, has been slowing since the start of this year. South African inflation has, since April this year, remained within the SARB’s target band at 4.6% y/y in November following 4.8% y/y in October. The SARB, being an inflation targeting central bank, kept rates unchanged at its November MPC meeting whilst pointing out that there are upside risks to their inflation forecast. The SARB cited higher international oil prices and a weaker rand exchange rate as reasons not to cut rates, while expecting inflation to remain within the target range in the near term. The outcomes of the ANC electoral conference and Moody’s review decision later in 2018 could have a significant impact on the rand. Adverse outcomes from these two events will most likely trigger capital outflows. Weak economic growth locally as well as regionally, and a slowdown in inflation, provided plenty of cause to expect rate cuts in 2017. This was not to be and the year will end with only one rate cut of 25 basis points exercised in July and August by the SARB and BoN respectively. At present South Africa looks set to enter 2018 with expectations of interest rate hikes which will be emulated by BoN should they transpire.