Category Archives: Economic Research

Economic Research

New Vehicle Sales – September 2015

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A total of 1,646 new vehicles were sold in Namibia during September. New vehicle sales decreased by 13.8% year on year, but increased 3.3% month on month. At this point of the year, 16,175 vehicles have been sold so far in 2015, up 1% on the comparable period of 2014. Although this figure keeps Namibia on track for a record year of new vehicle sales at present, the declining rate of growth of new vehicle sales suggests otherwise. The 12-month cumulative measure of new vehicles sold decreased further to 22,090 in September from 22,354 in August, largely due to an elevated base and strong vehicle sales in 2014.

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Passenger vehicle sales rose by 4.3% month on month, from 665 in August to 683 in September, down from a high of 910 in March this year. On a year to date basis, sales of passenger vehicles slowed further by 1.3% to 7,199, while year on year sales fell by 10.7% off a reasonably high base. After August, this is the second year to date contraction in passenger vehicle sales since March 2013. 2014 saw exceptional growth in passenger vehicle sales which has proven to be unsustainable as the year to date percentage change in vehicle sales has shown. In 2014 this measure of passenger vehicle sales growth averaged 27% per month but has dropped to -1.2% for this year.

Commercial vehicle sales increased by 2.7% month on month as 963 vehicles sold. On a year on year basis a 15.9% decrease was recorded. Thus while the year to date figure is still above last year’s, the growth rate in commercial vehicle sales is declining steadily, although off a high base. Light commercial vehicle sales increased slightly by 0.2% month on month but fell 18.9% year on year. Medium commercial vehicle sales fell 7.8% month on month and declined 12.5% year on year. Heavy commercial vehicle sales rose by 47.3% month on month and 35.0% year on year, emphasizing the trend of slowing growth in sales. Despite this trend year to date commercial vehicle sales are still on track for a record year.

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Toyota once again topped the number of vehicles sold per brand for the month at 650, a market share of 39.0%. 193 or 28.1% of the 683 passenger vehicles sold during the month were Toyotas, as well as 457 or 54.0% of the 847 light commercial vehicles sold. Volkswagen moved 174 passenger vehicles or 25.5% of the total sold during the month. In total Volkswagen’s market share was 13.0% of the total. Ford managed 7.5% market share for the month, closely followed by Nissan with 6.0% and Isuzu with 5.9%.

Picture5The Bottom Line

We have seen exceptionally strong vehicle sales growth through 2014, fuelled by a strong consumer base supported by expansionary fiscal policy and real wage growth, but the latest figures show that this trend is losing momentum. Strong vehicle sales in 2014 have elevated the base substantially which has led to lower percentage growth figures, although the number of vehicles sold is still strong. Thus we may see vehicle sales normalising somewhat at the levels seen this year. Downside risks to this are rising interest rates which may limit marginal lenders from qualifying for financing as well as banking sector liquidity which may limit the amount of loans available to finance vehicle purchases.

 

Building Plans – September 2015

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A total of 206 building plans valued at N$133.7 million were approved by the City of Windhoek in September 2015. On a year to date basis, 1,965 plans were approved with a value of N$1.543 billion, versus 2,258 plans valued at N$1.837 billion for the same period last year. This represents a 16.0% decrease in the value of plans approved on a year to date basis. This decrease is mainly due to base effects as three large commercial projects were approved by the municipality in February 2014. The September value, however, is in line with the average year to date value over the last 5 years of N$1.558 billion. On a month to date basis, the value of plans approved decreased by 16.2%, due to a fall in the value of approved additions, domestic and commercial spaces compared to August. The below chart illustrates the value of plans approved on a tear to date basis compared to previous years.

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The 12-month cumulative value of plans approved continued to fall, down from N$2.012 billion in August to N$2.004 billion this month, along with the cumulative number of plans approved, which fell from 2,648 in August to 2,553 in September. These figures are presented in the charts below.

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In our view, the construction sector will remain one of the leading growth and development sectors for 2015 in the Namibian economy, with both private sector and government having aggressive development plans. However, since many of these plans occur outside the Windhoek municipal area, they are not captured in the monthly building plan statistics.

 

PSCE – August 2015

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PSCE Aug1

Overall

Total credit extended to the private sector increased by N$1.03 billion, or 1.39%, in August 2015, taking total credit outstanding to N$75.12 billion. On an annual basis PSCE growth slowed slightly from 15.90% in July to 15.80% in August. A total of N$10.25 billion worth of credit has been approved over the last 12 months with N$5.73 billion worth of credit being approved in 2015 thus far. Of the N$10.25 billion worth of credit issued during the last 12 months, approximately N$5.80bn was taken up by businesses, while N$4.32bn was taken up by individuals.

PSCE Aug2

Credit extension to households

Credit extension to households expanded by 0.76% on a monthly basis and 10.96% on an annual basis in August. Credit extension to households is now growing at a more sedate pace than in the past and may slow further as interest rate hikes change consumer trends. It is worth remembering however that the transmission mechanism between rate hikes and PSCE contractions is relatively slow, particularly when interest rate increases are small.

Household mortgage loans expanded by 0.94% month on month and 13.10% year on year and continue to make up the majority of credit extended to households or individuals. On a year on year basis the rate at which individuals are taking up mortgage loans has been increasing from below the average rate of private sector credit extension to households to well above it. On a year on year basis mortgage loan issuance is thus driving credit extension to individuals.

Installment credit, the second largest component of loans extended to individuals, grew at 2.44% year on year in August, slightly up from 2.18% in July, although well off the rapid growth we saw in the first half of the year. On a month on month basis installment credit grew by 1.82%. The lackluster installment credit growth can be attributed to tighter monetary policy as well as a possible slowdown in credit extension by banks due to less than ideal liquidity positions. We will monitor this figure closely in the coming months as a longer term slowdown in trend growth would confirm the apparent liquidity issues within the country and put pressure on consumers.

PSCE Aug3

Credit extension to corporates

Credit extension to corporates grew by 2.18% on a month on month basis and 23.07% year-on-year In August, once again meaningfully higher than credit extended to households. This expansion was again primarily driven by exceptional growth in mortgage loans, up 29.21% year on year and 3.09% month on month. Installment credit extended to corporates grew at a rate of 42.38% year on year and 1.51% month on month, while overdraft facilities grew by 15.17% year on year and 3.40% on a month on month basis. Total credit issued to corporations has, in the past, made up less than 40% of total PSCE but has crossed this threshold, now making up 41.2% of the total figure. Although corporate credit has been growing at a far quicker rate than credit extended to individuals, the relatively low base from which this growth stems means that the majority of private sector credit still sits with the individual.

Reserves and money supply

The stock of foreign reserves decreased slightly by the end of August 2015, as can be seen in the below figure. International reserves stood at N$14.07 billion at the end of August, down from N$14.3 billion at the end of July. August tends to see a slight decline in reserves due to the lack of significant inflows during this month. The Namibian reserve position remains a concern as the hard currency value (US$) of reserves continues to decline. The Rand has experienced a 15% decline versus the US Dollar thus far this year, a trend that is expected to continue in the long term. International reserves should appreciate in local currency terms due to the depreciation of the local currency but the fact that reserves are not is cause for concern.

PSCE Aug4

Outlook

Private sector credit extension continues to grow at a rapid rate, adding approximately N$1 billion to the total outstanding private sector credit each month. While the rate of growth has been slowing slightly in recent months, the base off of which it is calculated has grown significantly. This signifies an economy expanding rapidly. A slowdown in the growth rate of credit extended to individuals since 2014 has been compensated for by the rapid growth of credit extended to corporates. The current rate hiking cycle as well as the inflated base should see future PSCE growth slow somewhat. Current banking sector liquidity conditions should put further pressure on credit extension growth as funding becomes more expensive. While not ideal, negatives to the slowdown in credit extension, especially to individuals, may be outweighed by longer term positives. A slowdown in credit extension growth should lead to a reduction in the amount of money flowing out of the country for consumptive purposes, boosting the international reserve position of Namibia. Higher interest rates should also lead to an increase in saving by individuals which is at low levels at present. A slowdown in credit extension to more natural rates (closer to GDP growth) should be positive for the economy and prevent it from overheating.