Category Archives: Economic Research

Economic Research

New Vehicle Sales – November 2015

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A total of 1,721 new vehicles were sold in Namibia during November. New vehicle sales decreased by 13.6% year on year and decreased 2.6% month on month. At this point of the year, 19,663 vehicles have been sold so far in 2015, down 2.3% on the comparable period of 2014. Thus Namibia is no longer on track for a record year of new vehicle sales, the declining rate of growth of new vehicle sales suggests that we may see a contraction. The 12-month cumulative measure of new vehicles sold decreased further to 21,494 in November from a high of 22,664 in April, largely due to an elevated base and strong vehicle sales in 2014.

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Passenger vehicle sales fell by 19.1% month on month, from 727 in October to 588 in November, down from a high of 910 in March this year. On a year to date basis, sales of passenger vehicles slowed further by 4.4% to 8,421, while year on year sales fell by 23.0% off a high base. 2014 saw exceptional growth in passenger vehicle sales, setting a high base, which has proven to be unsustainable as the year to date percentage change in vehicle sales has shown.

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Commercial vehicle sales increased by 8.9% month on month as 1,133 vehicles were sold. On a year on year basis commercial vehicle sales decreased by 7.7%, and the year to date figure is now lower than for the same period last year as the growth rate in commercial vehicle sales declined steadily, turning negative for the first time in 29 months. Light commercial vehicle sales increased by 12.2% fell 6.7% year on year. Medium commercial vehicle sales fell 44.2% month on month and 38.5% year on year, largely due to the low number of vehicles sold in this category. Heavy commercial vehicle sales fell by 3.0% month on month and 17.2% year on year. Medium and Heavy commercial vehicle sales figures fluctuate greatly due to the low numbers of these vehicles that are sold on a monthly basis. On a year to date basis both medium and heavy commercial vehicle sales are still on track for a record year while light commercial sales figures have declined to below last year’s level.

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Toyota once again topped the number of vehicles sold per brand for the month at 824, a market share of 47.9%. 184 or 31.3% of the 588 passenger vehicles sold during the month were Toyotas, as well as 639 or 61.1% of the 1,045 light commercial vehicles sold. Volkswagen moved 118 passenger vehicles or 20.1% of the total sold during the month. Volkswagen’s market share was 8.8% of the total. Nissan lost some market share this month with 9.3% of the total vehicle sales and Ford’s market share declined to 6.3% for the month.

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The 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 as a whole is still strong. We expect to 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 – November 2015

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A total of 218 building plans valued at N$332.9 million were approved by the City of Windhoek in November 2015, with one project classified as an addition to be built in Rocky Crest, valued at N$180.0 million. On a year to date basis, 2,394 plans were approved with a value of N$2.124 billion, versus 2,710 plans valued at N$2.054 billion for the same period last year. This represents a 3.4% increase in the value of plans approved on a year to date basis, posting growth for the first time in eleven months, largely due to the Rocky Crest property approved in November this year and a commercial property to be built in Lafrenz, valued at N$102.0 million approved in October. The below chart illustrates the value of plans approved on a year to date basis compared to previous years.

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The 12-month cumulative value of plans approved increased from N$2.166 billion in October to N$2.369 billion this month, illustrated on the chart below. The figure is 8.3% more than a year ago, turning positive for the first time in eleven months. However, the cumulative number of plans approved continued to fall, down from 2,543 in October to 2,531 in November.

Picture3In 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 – October 2015

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PSCE Oct 1

Overall

Total credit extended to the private sector increased by N$809 million, or 1.07%, in October 2015, taking total credit outstanding to N$76.7 billion. On an annual basis PSCE growth slowed slightly from 15.7% in September to 14.9% in October. A total of N$10 billion worth of credit has been approved over the last 12 months with N$7.4 billion worth of credit being approved in 2015 thus far. Of this N$10 billion worth of credit issued during the last 12 months, approximately N$5.5 billion was taken up by businesses, while N$4.4 billion was taken up by individuals.

PSCE Oct 2

Credit extension to households

Credit extension to households expanded by 0.8% on a monthly basis and 11% on an annual basis in October. Credit extension to households has continued to slow 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. We do expect to see further rate hikes going forward and this should lead to a continuation of the slowdown of credit extension to households. On a month on month basis Namibia has experienced two contractions in credit extended to households within 2015.

Household mortgage loans expanded by 0.80% month on month and 13.1% 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.

PSCE Oct 3

Instalment credit, the second largest component of loans extended to individuals, grew at 1.9% year on year in October, down from 15.7% in September, well off the long term average growth for this component of PSCE. On a month on month basis instalment credit grew by 0.7%. The lackluster instalment credit growth can be attributed to tighter monetary policy as well as a slowdown in credit extension by credit providers due to less than ideal liquidity conditions. The liquidity issues currently faced by the country are highlighted in these articles: Namibian Economy to Slow and Banking sector liquidity crisis exacerbated by Kwanza agreement.

PSCE Oct 4

Credit extension to corporates

Credit extension to corporates grew by 1.6% on a month on month basis and 20.8% year-on-year In October, once again meaningfully higher than credit extended to households. This expansion was again primarily driven by exceptional growth in mortgage loans, up 29.2% year on year and 1.9% month on month. Instalment credit extended to corporates grew at a rate of 37.7% year on year and fell 0.2% month on month, while overdraft facilities grew by 10.5% year on year and decreased 1.7% on a month on month basis. 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 increased significantly by the end of October due to the inclusion of the proceeds of Namibia’s successfully issued second Eurobond. International reserves stood at N$22.7 billion at the end of October, up from N$12.8 billion at the end of September. The Eurobond proceeds are a major boost to the reserve position of the country which has been declining in hard currency terms. A concern is that the hard currency raised via the Eurobond will be converted into Namibia Dollars in order to fund Government as was done with the first Eurobond. The first Eurobond has become relatively more expensive than debt raised locally due to the depreciation of the Rand versus the dollar. There is a risk that history will repeat itself if the money raised via the second Eurobond is converted to Namibia Dollars and used to fund consumptive spending in Government. The Rand has experienced a 24% decline versus the US Dollar thus far this year.

PSCE Oct 5

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. 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 is likely to put further pressure on credit extended to individuals in the coming months. Should we see a slowdown in the rate of mortgage loans extended to individuals we could experience contractions in the overall credit extended to individuals. The outlook for credit extended to corporates continues to look good although further rate hikes in the new-year as well as looming drought conditions may put pressure on this measure.

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 (GDP growth) should be positive for the economy and prevent it from overheating.