Category Archives: Economic Research

Economic Research

Building Plans – April 2023

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The City of Windhoek approved 131 building plans in April, representing a 28.8% m/m decline from the 184 building plans approved in March. The approvals were valued at N$173.4 million, a 69.1% m/m increase from the N$102.6 million approved in March. Year-to-date, 561 building plans worth N$370.7 million have been approved, down 26.8% in number terms and 28.6% y/y less in value terms compared to the same period in 2022. On a twelve-month cumulative basis, the number of approvals declined by 5.6% y/y to 2,262 and fell by 12.8% y/y in value terms to N$1.61 billion. A total of 54 building plans worth N$65.6 million were completed during April.

93 additions to properties valued at N$58.7 million received the nod in April. This was 21 fewer and N$4.29 million less than in April 2022. Year-to-date, 412 additions to properties worth N$147.2 million have been approved, representing a 13.8% decrease in number terms and a 45.8% drop in value terms compared to the corresponding period a year earlier. On a 12-month cumulative basis, both the number and value of additions to properties continued to decline. 1,609 additions to properties worth N$762.5 million were approved over the past 12 months, compared to 1,630 additions worth N$766.8 over the same period a month ago. A total of 12 additions valued at N$3.69 million were completed during April, the lowest monthly number and value of additions to properties recorded so far this year.

29 new residential units valued at N$38.1 million were approved in April, compared to the 58 units worth N$42.7 million receiving the go-ahead a year ago. Year-to-date, 132 new residential units worth N$124.7 million have been approved, down 52.5% from the 278 units worth N$208.4 million approved over the same period a year earlier. The 12-month cumulative new residential unit approval figures continued their downward spiral. 589 units worth N$620.4 million have been approved over the past 12 months, down 28.2% in number terms and 30.0% less in value terms compared to the corresponding period a year ago. A total of 41 residential units valued at N$47.9 million were completed during April.

9 new commercial and industrial units worth N$76.7 million were approved in April, more than thrice the cumulative value of commercial and industrial units approved over the first quarter of the year. This brings the year-to-date commercial and industrial building approvals to 17 valued at N$98.8 million, an increase of 152.3% from the N$39.2 million worth of units approved over the same period in 2022. On a rolling 12-month basis, both the number and value of commercial and industrial unit approvals ticked up from a month earlier. A total of 64 commercial and industrial units valued at N$222.5 million have been approved over the 12-month period, compared to 35 units worth N$184.4 million over the same period a year ago. Only 1 commercial and industrial unit was completed for the third month in a row.

Building plans data showed little buoyancy in April. The approval figures, particularly within the commercial space, witnessed some improvement. These advances were, however, achieved from a very low base and the overall picture for building plans remains relatively bleak as the graphs above and below imply. Construction activity is anticipated to remain low in the near term due to the sluggish economy grappling with high inflation and confronting elevated interest rates. All factors creating an unfavourable environment for fostering interest in new construction projects.

PSCE – March 2023

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Overall

Private sector credit (PSCE) fell by N$67.1 million or 0.06% m/m in March, bringing the cumulative credit outstanding to N$111.2 billion on a normalised basis (removing the interbank swaps the Bank of Namibia (BoN) accounts for in non-resident private sector claims). On a year-on-year basis, PSCE grew by 3.9% in March, compared to a 3.1% growth rate in February. The impact of base effects plays a role in the quicker annual rate, as PSCE fell by nearly 1.0% in March 2022. N$4.21 billion worth of credit was extended to the private sector over the past 12 months. Individuals took up N$3.36 billion worth of credit, while corporates took up N$846.1 million. 

Credit Extension to Individuals

Credit extended to individuals rose by 0.2% m/m and 5.4% y/y. All sub-categories, bar instalment credit, recorded growth on a month-on-month basis. Mortgage loans were again the biggest contributor of the month-on-month increase, registering growth of 0.1% m/m and 3.2% y/y. ‘Other loans and advances’ (consisting of credit card debt and personal- and term loans) continues to post strong growth, increasing by 0.4% m/m and 18.2% y/y in March, the quickest annual growth rate for this sub-category since March 2020. Overdraft facilities to individuals grew by 0.6% m/m and 0.8% y/y, while instalment credit fell marginally by 0.1% m/m but rose 2.5% y/y. 

Credit Extension to Corporates

Corporate credit extension fell by 0.4% m/m but rose 1.9% y/y. In contrast to credit extended to individuals, instalment credit to corporates was the only sub-category which posted monthly growth in March, growing by 3.2% m/m and 12.8% y/y, ahead of inflation, but from a low base. Mortgage loans declined by 0.2% m/m and 4.5% y/y. Other loans and advances contracted by 0.2% m/m but rose 7.1% y/y. Overdraft facilities to corporates fell by 2.3% m/m and 0.9% y/y. 

Banking Sector Liquidity 

The overall liquidity position of the commercial banks strengthened further during March, rising by N$718.4 million to an average of N$8.15 billion. According to the Bank of Namibia (BoN), the increase is due to improved diamond sales, coupled with government payments which were high due to the fiscal year end. Despite the strong liquidity position, the repo balance rose from zero at the start of the month to N$458.4 million at month end.

Money Supply and Reserves

The BoN’s latest monetary statistics show that broad money supply (M2) rose by N$2.32 billion or 1.8% y/y in March. The stock of international reserves climbed by 2.1% m/m or N$980.0 million to N$48.5 billion, translating to 5.1 months of import cover. The BoN attributed the increase to Customer Foreign Currency (CFC) placements.

Outlook

The cumulative credit outstanding fell in March as debt repayments by corporates outpaced credit uptake by individuals. As mentioned earlier in the report, the quicker year-on-year PSCE growth rate is mainly due to base effects, following a nearly 1.0% m/m drop in credit outstanding in March 2022. The subsequent increase in April 2022 of 1.6% m/m should result in a slower annual increase in April 2023 (closer to 2.5% y/y), all else equal.

Corporate credit uptake remains low, with only short-term ‘other loans and advances’ and instalment credit exhibiting positive growth on an annual basis, with the latter primarily from a low base. Credit uptake by individuals is faring better, by comparison, although the annual growth is primarily driven by short-term credit uptake in the form of credit card debt, and personal- and term loans.

Overall PSCE growth continues to trend well below inflation. We do not expect this to change in the short-term, given that inflation remains sticky after March’s print came in at 7.2% y/y and continues to trend above our forecasts.

Building Plans – March 2023

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A total of 184 building plans was approved by the City of Windhoek in March, a 10.2% m/m increase from the 167 approved in February. In monetary terms, the approvals were valued at N$102.6 million, a 41.1% m/m increase from the N$72.67 million approved in February. The first quarter of the year saw 430 building plans worth N$197.3 million approved, a contraction of 27.5% in number terms and 52.2% less in value terms compared to the first quarter of 2022. On a twelve-month cumulative basis, 2,304 buildings worth N$1.53 billion were approved, a decline of 6.8% in number- and 21.9% in value terms over the comparative 12-month period a year ago. 75 building plans worth N$41.86 million were completed during March.

March saw 136 additions to properties approved valued at N$33.81 million, 3 more than in March 2022 but N$22.43 million less in value terms. On a year-to-date basis, 319 additions to properties worth N$88.6 million were approved in the first quarter of 2023, representing a 12.4% decline in number terms and a 57.5% contraction in value terms compared to the first quarter of last year. On a 12-month cumulative basis, the number and value of additions to properties continued to decline and dropped below the levels seen for the corresponding 12-month period a year earlier. 29 Additions, worth N$8.03 million were completed during the month.

46 new residential units valued at N$48.75 million were approved in March, the highest monthly new residential unit approvals reported so far this year. Year-to-date, 103 new residential units worth N$86.6 million have been approved, down 53.2% from the 220 units worth N$165.7 million approved over the first quarter of 2022. The slump is also reflected in the 12-month cumulative figures which came in at 618 units worth N$624.9 million, a drop of 26.6% y/y in number terms and a contraction of 35.7% y/y in value terms. A total of 45 residential units worth N$31.83 million were completed during the month.

2 new commercial and industrial units worth N$20 million was approved in March. This brings the year-to-date approvals to 8 commercial buildings worth N$22.1 million, representing a 42.9% y/y drop from the N$38.8 million worth of commercial and industrial units approved over the first quarter of last year. On a rolling 12-month perspective, the number of commercial and industrial approvals remained unchanged at 56 units but dropped in value terms to N$146.2 million from N$156.2 million a month earlier. Only 1 commercial and industrial unit was completed for the second month in a row.

March’s building plans data showed a slight improvement from February but continue to decent compared to the data from a year ago. The graphs above and below depict that the planned construction activity in the capital has gotten off to a weak start in 2023, like the previous lows of 2009, marking it the weakest start to a year in the past decade.  More hardship is expected over the shorter term with local interest rates almost certain to rise even further in April which will make borrowing cost for new construction projects even more expensive in an already tepid economy. Meanwhile, the Construction Industries Federation of Namibia (CIF) continue its efforts in encouraging the government to establish a Construction Council which it believes will assist in stemming unwanted practices in the sector which arguably will improve competition and drive down construction costs – one of the factors deterring growth in this sector.