Category Archives: Economic Research

Economic Research

Building Plans – June 2017

By | | ,
Comments Off on Building Plans – June 2017

A total of 182 building plans were approved in June, this too was the same total number of building plans approved in May. Though there was no change in the number of plans approved, there has been a significant change in the value of plans approved during June, totalling N$295.8 million, in contrast to the N$655.5 million recorded in May. A total 17 buildings with a value of N$36.6 million were completed during the month. The year to date value of approved building plans currently stands at N$1.45 billion, 52% higher than the corresponding period in 2016. On a twelve-month cumulative basis, 1,848 building plans were approved worth approximately N$2.47 billion, 20.5% higher than the preceding twelve-month period.

The majority of the number of building plan approvals were made up of additions to properties. 159 plans were approved in June, up from the 143 approved in May. Year to date, 755 additions to properties were approved with a value of N$613 million, 40.3% more in value terms than the corresponding period in 2016.

New residential units approved perennially is the second largest contributor to building plans approved. 158 residential units have been approved year to date, 49 more than during the corresponding period in 2016. In dollar terms, N$282.7 million worth of residential plans were approved, 24.8% higher than in the corresponding period in 2016. The increased activity in the residential sector is quite encouraging to see, indicating that demand persists for housing from the middle-income consumer.

The number of commercial units approved in 2017 amounted to 17, valued at N$561.3 million. This compares to 36 units valued at N$295.1 million approved over the same period in 2016. Only 1 building valued at N$10 million was approved in June. Bearing in mind that we are only half way into the year, value of plans approved already exceeds the total approvals recorded for the whole of 2016. This coming off the back of 1 commercial plan approval valued at N$500 million in May, set for construction to take place in the Windhoek CBD area.

The 12-month cumulative number of building plans approved has ticked up slightly in June. It however remains low at half of the September 2013 peak. In the last twelve months 1,848 building plans were approved, 7.3% less than the same measure for June 2016.

Government has managed to source funding in the form of a N$3 billion loan from the African Development Bank (AfDB). Treasury revealed recently that it plans to pump more than N$2.5 billion into the Namibian economy in the coming months. This will be done through the settlement of outstanding invoices, with hopes of easing the financial squeeze felt in the country. Already we’ve seen improvement in commercial banks liquidity position, which should imply banks having increased levels of loanable funds to be made available to the consumer. The struggling construction sector is set to be the largest recipient of the envisaged settlements owed by government. These positive developments support the relative increase in the number of plans approved for additions and new residential approvals which continue to be the two biggest contributors of growing approvals and completions.

PSCE – May 2017

By | | ,
Comments Off on PSCE – May 2017

Overall

Total credit extended to the private sector increased by N$586.1 million or 0.7% m/m in May, bringing the cumulative credit outstanding to N$87.95 billion. On a year on year basis, credit extended grew by 8.2%, though slightly higher that the8.1% recorded in April, it remains of the slowest growth seen in PSCE for the last 5 years. On a rolling 12-month basis, N$6.69 billion worth of credit was extended, down significantly from the N$10.3 billion high of 2015. This consisted of N$2.82 billion worth of credit extended to corporates and N$4.02 billion to individuals, while the non-resident private sector on the other hand decreased their borrowings by N$150.8 million.

Credit extension to households

Credit extension to individuals picked up slightly in May, expanding by 8.6% y/y and 0.4% m/m. Installment credit contracted further by 0.7% m/m bringing the year on year growth to 3.0%. Vehicle sales, which make up a large portion of installment credit, has taken a nosedive since the end of 2015 and has since been struggling to recover. Similarly, the growth in mortgage loans remains sluggish at 1.2% m/m and 8.8% y/y. There has been however, a noticeable shift in overdrafts facilities extended to individuals, up 17.34% y/y with a m/m change of 0.30%.

The large year-on-year increase  in overdraft advances is a sign that the Namibian consumer is still under pressure, while other loans and advances recorded a m/m contraction of 0.9%, with a y/y increase of 20.0%. The general slowdown in mortgage and installment credit extended to individuals is attributable to tighter lending conditions as well as a deterioration in the creditworthiness of the average borrower as household debt has increased substantially for the average consumer.

Credit extension to corporates

Credit extended to corporates grew by 0.7% m/m in May after contracting 0.4% m/m in April.  Annual growth is up from 7.4% y/y recorded in April to 8.4% in May. Instalment credit extended to corporates contracted by 0.7% m/m, the eighth consecutive monthly contraction, which also further contributed to a contraction of 1.0% y/y. Mortgage loans extended to corporates during May grew by 1.2% m/m and grew only by 4.8% y/y. Mortgage loans extended to corporates have recorded single digit growth figures for the past nine months, far from the highs of 20.4% seen February of 2016. Overdrafts extended to corporates recorded increases of 0.3% on a m/m basis and 18.6% y/y.

Banking Sector Liquidity

The overall liquidity position of commercial banks has shown healthy improvement, closing at a monthly average of N$3.29 billion during May, up from the average N$1.83 billion seen during April. We expect this to remain relatively stable in the very near term, boosted by the loan from the African Development Bank seems to have alleviated some of the pressure  on government to fund their deficit though debt issuance. This should serve as a sign that banks have  increased supply of loanable funds This sentiment being supported by the increased levels overdrafts extended to both corporates and to individuals.

Reserves and money supply

Foreign reserves decreased by N$262 million to N$25.4 billion at the end of May from N$25.7 billion in April. According to the Bank of Namibia the decline in the level of reserves emanated mainly from government payouts and the appreciation of the local currency.

Outlook

The outlook for private sector credit extension continues to improve albeit slightly. Small signs of positivity are showing in the form of the improved overall liquidity position of commercial banks. We believe that with the banking sector now having increased levels of loanable funds and relatively lower short term funding costs, it should incentivize the commercial banks to lend more. However, sluggish demand for mortgage and vehicle loans will in all likelihood persist over the short to medium term. Also bearing in mind the latest Q1 GDP release from the NSA that now affirms that Namibia is in a recession makes for a relatively dim outlook. Furthermore, there has been some relief, with inflation being on the decline since the start of the year, currently at 6.3%., Furthermore, the South African Reserve Bank is expected to cut interest rates this year and Bank of Namibia is likely to follow, which may give the already stretched consumer more room to breathe.

NCPI – May 2017

By | | ,
Comments Off on NCPI – May 2017

Annual inflation declined to 6.3% y/y in May, 0.4% y/y lower than April, while prices increased by 0.1% m/m. The lower annual figure was due to further moderation of food price inflation with is currently at 3.7% y/y, down from the 2016 average of 10.8%. Of the twelve basket items, three saw a higher annual inflation rate than the previous month, two remained unchanged, while seven categories saw lower rates of price increases. Prices for goods increased 4.9% y/y while prices for services grew 8.2% y/y, with slower growth in goods prices supported by a stronger Namibian dollar and lower food prices.

Housing and utilities remains the largest contributor to annual inflation due to its large weighting in the basket and the effect of irregularly high rental increases of 9.7% in January. This category increased by 9.8% y/y and 0.3% m/m. Annual inflation for rental payments for dwelling remained at 9.6% in May and will likely remain this high for the rest of the year. Furthermore, NamWater has been granted an approved 13% increase in water delivery, effective on 1 June while NamPower received an approved 8% from the Electricity Control Board effective 1 July this year. The increases in utilities is likely to be passed on to the consumer and should put upwards pressure on this basket category going forward. We continue to expect the housing and utilities basket category to underpin overall inflation.

Transport was the second largest contributor to annual inflation, accounting for 0.9% of the total 6.3% inflation figure. Transport prices increased 7.1% y/y and 0.6% m/m, driven largely by the 7.6% y/y increase in the price of vehicles, but also by the 9.3% y/y increase in the operational cost due to higher fuel prices.

Food and non-alcoholic beverages, the second largest basket item, was the third largest contributor to annual inflation, accounting for 0.7% of the total inflation figure. Food and non-alcoholic beverage prices increased by 3.7% y/y, a further slowdown compared to the 5.8% increase in April, well below the peak of 13.2% witnessed in January.  The slowdown in annual food inflation is largely due to lower inflation on agricultural produce resulting from good rainy seasons in parts of South Africa. Bread and cereal prices have decreased by 3.7% y/y, the price of vegetables have decreased by 4.0% y/y and fruits are only 1.5% more expensive on an annual basis.

The Alcohol and tobacco category displayed increases of 3.3% y/y and 0.1% m/m in May versus 3.9% y/y and 0.4% m/m in April. The main driver in this basket category remains alcohol prices which increased by 3.5%y/y while tobacco was up 2.6% y/y. Inflation in this category remains relatively muted despite the announcement of increased sin taxes in March.

Namibian inflation is decreasing at a faster pace than we anticipated at the start of the year. A strengthening rand and a strong decline in food prices has seen inflation moderating substantially. Similarly, South Africa has seen their inflation returning to the target band faster than expected. The rand exchange rate benefited from increased global capital inflows to emerging markets which largely offset the impact of the sovereign credit ratings downgrade. However, the possibility of further downgrades in the future remains a risk for currency weakness going forward, which would likely push inflation higher in both Namibia and South Africa.