Category Archives: Economic Research

Economic Research

Building Plans – April 2017

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A total of 143 building plans were approved in April with a value of N$112.9 million, while 9 buildings with a value of N$26.7 million were completed. Thus far 2017 is off to a poor start, year to date 566 plans were approved while 76 were completed, the lowest number of plans approved and completed in the last twenty years. The year to date value of approved building plans currently stands at N$505.6 million, 32.4% lower than the corresponding period in 2016. On a twelve-month cumulative basis, 1694 building plans were approved worth approximately N$1.73 billion, 27.1% less than the preceding twelve-month period.

The largest portion of building plan approvals were made up of additions to properties, from both a number and value perspective. Year to date 453 additions to properties were approved with a value of N$274.9 million, 10.6% less in value terms than the corresponding period in 2016, but also 69 less additions in absolute terms.

New residential units were the second largest contributor to building plans approved: 100 residential units were approved year to date, 20 more than the corresponding period in 2016. In dollar terms, N$180.6 million worth of residential plans were approved, 2.0% higher than the corresponding period in 2016. It is encouraging to see that the slowdown has been less pronounced in the residential segment as there is still a lot of demand for middle and low income housing.

The number of commercial units approved in 2017 amounted to 13, valued at N$50.1 million. This compares to 31 units valued at N$263.4 million approved over the same period in 2016. On average over the last 20 years, 19.2 commercial units valued at N$157.6 million were approved in the first four months of the year, which would indicate that this is an especially slow year thus far.

The 12-month cumulative number of building plans approved has been steadily declining since its peak in September 2013. This figure has halved from the peak to lows last witnessed in 1991. In the last twelve months 1,694 building plans were approved, 23.8% less than the same measure for April 2016.

According to the Namibian Preliminary National accounts construction sector that recorded a decline in real value added of 29.5% for the year of 2016, which made it the largest detractor to economic growth. Between 2010 and 2015 construction took centre stage in the Namibian economy and created a substantial base off which continued growth was always going to be a challenge, but the abrupt slowdown is likely to cause ripple effects in the economy.

As a leading indicator for economic activity in the country this implies that the whole economy could remain under pressure for the foreseeable future. With government spending on infrastructure slowing and the current economic environment making it increasingly difficult for banks to extend credit, we expect further contractions in the construction sector in 2017 and possibly beyond. This is cause for concern as the sector has always been a large employer, and layoffs would have a negative effect on unemployment.

Namibia New Vehicle Sales – April 2017

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Vehicle sales slowed considerably in April with a total of 946 vehicles were sold, a 32.5% m/m decrease from the 1,402 vehicles sold in March and 36.7% lower than April 2016 when 1,495 vehicles were sold. The slowdown is also evident in the 12 month cumulative sales, as the last twelve months saw 15.0% less vehicles being sold relative to the preceding twelve months. Year to date 4,409 new vehicles have been purchased, the lowest level since 2011. Of these, 2,044 were passenger vehicles, 2,172 were light commercial vehicles, and 193 were medium or heavy commercial vehicles.

Vehicle sales have been contracting on a year on year basis since mid-2015 and year-to-date sales are well below the previous five years. The slowdown is evident in both the passenger and commercial segments, the former having contracted 39.9% y/y while the latter is down by 34.1% y/y. The slow sales numbers in the medium and heavy commercial vehicles remain worrisome, as it indicates a lack of business confidence which may be due to either unwillingness or inability to invest into businesses.

Passenger vehicle sales decreased by 40.6% m/m to 409 vehicles in April, while commercial vehicles sales declined by 24.8% m/m to 714. Of the 537 commercial automobiles sold, 489 were classified as light, 12 as medium and 36 as heavy. The sharp month on month decrease seems to seasonal in nature, as vehicle sales are normally higher in March on average. However, the last month is well below the average sales normally seen in April.

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 32% and 31% of the market respectively. They were followed by Ford and Nissan at 5% each, while the rest of the passenger vehicle market was shared by several competitors.

Toyota also remains the leader in light commercial vehicle sales with 49% of the market, followed by Nissan at 16%. Ford and Isuzu claimed 13% and 10% of the number of light commercial vehicles sold in 2017. Iveco is the leader of medium commercial vehicles with 29% of the market followed by Hino at 28%. In the heavy and extra heavy category, Mercedes and Scania have sold the most vehicles, claiming 26% of the market each.

The Bottom Line

From mid-2015, the new vehicle market in Namibia has been in a state of decline and it seems this trend will continue well into 2017. Lower government spending, specifically on capital assets have had a direct effect on the number of vehicles sold. Additionally, slower economic growth means that consumers will have lower disposable incomes and many consumers have been reigning in their spending as a result. Furthermore, the Credit Agreement Act, which was implemented in August of 2016, prescribes a deposit of 10% on all vehicle loans and limits repayment periods to 54 months. This has reduced the number of people eligible for vehicle financing.

Namibia CPI – April 2017

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Annual inflation declined to 6.7% in April, 0.3% lower than March. Prices increased by 0.3% m/m. The lower annual figure was due to moderation of food price inflation with is currently at 5.8% y/y, down from its 2016 average of 10.4%. Of the twelve basket items, only two saw a higher annual inflation rate, four remained unchanged, while seven categories saw lower rates of price increases. Prices for goods increased 5.6% y/y while prices for services grew 8.2% y/y, with slower growth in goods prices supported by a stronger Namibian dollar.

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. Annual inflation in this basket category declined to 9.6% in March as the rental payments subcategory was adjusted downward by 0.1% on a m/m basis and have remained at that level in April. Furthermore an 8% tariff increase has been approved by the Electricity Control Board effective 1 July, which should put upwards pressure on this basket item going forward. We continue to expect the housing and utilities basket category to underpin overall inflation.

Food and non-alcoholic beverages, the second largest basket item, was the second largest contributor to annual inflation, accounting for 1.0% of the total 6.7% inflation. Food and non-alcoholic beverage prices increased by 5.8% y/y, a further slowdown compared to the 7.3% increase in March, and was below the peak of 13.2% witnessed in January.  The slowdown in annual food and non-alcoholic beverage inflation was partly due to base effects as well as lower inflation on agricultural produce resulting from good rainy seasons in parts of South Africa. Bread and cereal prices have moderated to 0.9% y/y, the price of vegetables have decreased by 1.3% y/y and fruits are 0.8% more expensive on an annual basis. While annual growth in coffee, tea, and cocoa prices has slowed slightly, this subcategory has still seen prices increase by 22.4% on a y/y basis, the quickest in the food basket. Fish prices are also still significantly up over last year at 15.8%.

Transport is one of the two basket categories which saw an annual increase in April. This was driven largely by the 8.2% y/y increase in the price of vehicles, but also by the 8.1% y/y increase in the operational cost largely due to higher fuel prices than last year.

The Alcohol and tobacco category displayed increases of 3.9% y/y and 0.4% m/m in April versus 4.4% y/y and 0.4% m/m in March. The main driver in this basket category remains alcohol prices which increased by 4.2%y/y while tobacco was up 2.5% y/y. Normally the effect of sin taxes result in average increases of 4.1% over the months of March and April, thus the increase of only 0.8% over those two months this year is unusually low, especially considering that sin tax increases have been larger than previous years.

Namibian inflation is decreasing at a faster pace than we anticipated at the start of the year. A strengthening rand on a y/y basis has driven a decrease in goods inflation specifically. Oil prices remain relatively stable at around US$50 to US$55/barrel, and the end of the regional drought has brought some relief to consumers with some food prices declining. The recent downgrade of South Africa’s credit rating however, has seen the rand depreciate somewhat, and more weakness could follow if local currency ratings are downgraded. This will flow through to inflation and could cause South African inflation to remain above the 3% to 6% target range for longer than expected. We also expect Namibian inflation to remain elevated in the short term, averaging around 7.4% for the year.