Category Archives: Economic Research

Economic Research

NCPI February 2023

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Namibia’s annual inflation rate soared to 7.2% y/y in February following a 7.0% y/y increase in prices recorded in January. Prices in the overall NCPI basket rose by 0.4% m/m, compared to a 1.1% m/m increase in January. On a year-on-year basis, overall prices in eight of the twelve basket categories rose at a quicker rate in February than in January, three categories recorded slower rates of inflation with education the lone category posting inflation in-line with January. Prices for goods increased by 10.1% y/y while prices for services rose by 3.1% y/y. This represents the greatest annual inflation margin recorded between goods and services inflation since December 2008.

Inflation Attribution

The food and non-alcoholic beverages basket category were again the biggest contributor to the annual inflation print after prices in this basket category rose 14.0% y/y in February. The basket category contributed 2.6 percentage points to the annual inflation rate in February. Month-on-month food and non-alcoholic beverage prices rose by 1.0%, slowing from the 2.3% recorded on average over the past 2 months. Fruit price inflation accelerated for a third consecutive month to 26.8% y/y, with citrus prices rising by 27.4% y/y and avocados by 75.7% y/y. The prices of breads and cereals rose by 0.7% m/m and 22.0% y/y with prices of all of the food items in this sub-category rising by double digits percentages year-on-year except for Mahangu meal which rose by a mere 0.3% y/y. Overall, most of the sub-categories in this basket posted higher inflation compared to January while bread, cereals, fish, vegetables and non-alcoholic beverages including coffee, tea and mineral waters showed signs of slowing inflation.

As the graph below depicts, transport was the second largest contributor to February’s annual inflation print, contributing 1.5 percentage points. Prices in this basket category was unchanged from last month but rose 9.9% when compared to the prices a year ago. Operation of personal transport equipment inflation continued to slow with prices in this sub-category rising 14.2% y/y compared to 15.9% y/y a month earlier. The Ministry of Mines and Energy’s decision to increase the price of petrol by 150c per litre from the beginning of March means we may see prolonged periods of elevated inflation for this category. Purchase of vehicles inflation also slowed in February. Prices in this subcategory fell 0.5% m/m while annual inflation decelerated to 5.3% from 6.2% a month earlier. Public transportation services inflation accelerated to 1.1% y/y from 0.9% in January while prices remained stable from last month.

The alcohol and tobacco basket category saw prices increase by 0.4% m/m and 7.1% y/y. The prices of alcoholic beverages climbed by 0.4% m/m and 7.6% y/y. The acceleration from January’s 6.5% y/y rate was largely driven by steep increases in prices of white spirits and brandies which rose 26.0% y/y and 8.1% y/y respectively. We expect more price pressures to come from this sub-category following the steep increase in ‘sin taxes’ on alcoholic beverages with effect from 23 February as was announced by the Minister of Finance during the FY2023/2024 budget speech last month. Tobacco products recorded price increases of 0.2% m/m and 5.1% y/y, with cigarette prices up 5.8% y/y while pipe tobacco prices increased by 2.9% y/y.  Similarly, more price pressures are expected from the increased ‘sin taxes’ on tobacco products.

Outlook

The acceleration of Namibia’s annual inflation rate to 7.2% in February marks the second consecutive month of higher annual inflation and comes as prices of items in most of the basket categories continue to soar. This shows that we have yet to enter a disinflationary cycle and that a prolonged restrictive monetary policy stance may be required to bring inflation down to desired levels.

Namibia is not alone in this predicament. We continue to see relatively high and ‘sticky’ inflation prints from numerous countries. Most notable are the US and the Eurozone, where their central banks are considering further interest rate hikes to push inflation down to target levels faster which in turn heightens fears of a possible recession in those economies.

Whether Namibia will be spared from further rate hikes will be largely dependent on the SARB’s assessment of the necessity to hike rates even further to bring South Africa’s inflation back within the target range of between 3-6%. South Africa’s annual inflation print stood at 6.9% in January. February’s inflation print is expected to be announced this week and will be followed by the SARB’s MPC announcement scheduled for 30 March. Both announcements should provide insight into the scope and duration of further interest rate hikes needed to curb inflation not only for South Africa but for our economy given the close economic ties with our southern neighbour.

Despite seeing inflation accelerating during the first two months of the year, IJG’s inflation model predicts a gradual slowdown in Namibia’s annual inflation rate over the remainder of year, before ending the year at around 4.5%.

Building Plans – February 2023

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The City of Windhoek approved 167 building plans in February, a 111.4% m/m increase from January’s low base of 79 approvals. In monetary terms, the approvals were valued at N$72.7 million, a 229.0% m/m increase from January’s dismal N$22.1 million. Year-to-date 246 building plans worth N$94.8 million have got the nod, a decrease in number of 37.7% y/y and down 66.7% y/y in value terms. On a twelve-month cumulative basis, 2,318 buildings worth N$1.56 billion were approved, a contraction of 7.4% in number- and 21.8% in value terms over the comparative 12-month period a year ago. 50 building plans worth N$41.6 million were completed during the month. 

Additions to properties made up the largest portion of building plan approvals in terms of both number and value of approvals. 127 additions to properties with a value of N$47.2 million were approved during the month, 5 fewer than in February 2022. While February’s additions to properties approvals data is significantly better than we saw in both January and December, it is still below the average monthly approvals we saw during 2022 in both number and value terms. On a 12-month cumulative basis, the number and value of additions to properties remain roughly in line with the levels seen during the same 12-month period a year ago. 26 Additions, worth N$12.6 million were completed during the month. 

37 New residential units valued at N$23.5 million were approved in February. Again, while this is 17 more, and nearly double the value we saw approved for this category in January, it remains significantly lower than the approvals recorded for most months during 2022. For added perspective, the monthly average approvals in 2022 was 61 residential units worth N$58.7 million. The slowdown is also evident in the 12-month cumulative figures which stands at 635 units worth N$618.0 million, a decline of 26.2% y/y in number terms and a contraction of 39.3% y/y in value terms. A total of 23 residential units worth N$27.8 million were completed during the month. 

February saw 3 new commercial and industrial units approved for the third consecutive month. In value terms, the approvals amounted to just N$1.95 million. This brings the year-to-date approvals to 6 commercial buildings worth N$2.1 million, which translates to a 14.3% y/y decrease in the number of plans approved and a 75.6% y/y decrease in value terms. On a rolling 12-month perspective, the number of commercial and industrial approvals stood at 56 worth N$156.2 million, compared to the 40 units worth N$172.7 million over the corresponding period a year ago. Only 1 commercial unit valued at N$700,000 was completed in February. 

The building plans data for February showed an improvement in planned construction activity from January, although the increase was from a very low base, and the month’s approvals were well below the average monthly approvals witnessed in 2022, as mentioned a couple of times in this report. The total value of approvals in February (at N$72.7 million) was more than three times reported in January, but still below half the monthly average recorded last year.

2023 is thus off to a particularly slow start in terms of planned construction activity in the capital. As we pointed out in last month’s report, building plan approvals is a leading indicator of economic activity in the country and the above data implies that certain sectors of the Namibian economy are still faced with hardship.

New Vehicle Sales – February 2023

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A total of 1,103 new vehicles were sold in February, 294 more than the upward revised figure of January, and represents a 24.9% y/y increase from the 883 new vehicles sold in February 2023. 1,912 new vehicles were sold during the first two months of 2023, of which 1,035 were passenger vehicles, 783 light commercial vehicles, and 94 medium- and heavy commercial vehicles. By comparison, the first two months of 2022 saw 1,591 new vehicles sold. 2023 is thus off to a strong start compared to last year. On a 12-month cumulative basis, new vehicle sales rose by 19.2% y/y to 11,244.

559 New passenger vehicles were sold during February, an increase of 17.4% m/m and 27.3% y/y. This is the highest monthly number of new passenger vehicle sales since July 2018. On a 12-month cumulative basis, new passenger vehicle sales have increased by 26.2% y/y to 5,763. The 1,035 new passenger vehicles sold so far this year marks the highest number of year-to-date sales by February since 2016. Compared to the same period in 2022, the year-to-date figure for February has increased by 189 units or 22.3% y/y.

February was a similarly strong month for new commercial vehicle sales, with the 544 units sold during the month the highest monthly figure since March 2021. New commercial vehicle sales rose 63.4% m/m and 22.5% y/y in February. The month saw 486 light commercial vehicles, 25 medium commercial vehicles, and 33 heavy commercial vehicles sold. On a year-on-year basis, light commercial sales rose by 32.8% y/y, medium commercial vehicles grew by 56.3% y/y, and heavy and extra heavy vehicle sales declined by 46.8% y/y from a high base in February 2022. All sub-categories, bar heavy- and extra heavy vehicles, have recorded growth on a twelve-month cumulative basis with light commercial vehicle sales increasing by 16.6% y/y, medium commercial vehicles sale rising by 12.4% y/y, while heavy commercial vehicle sales contracted by 16.7% y/y.

Toyota enjoy a strong lead in the new passenger vehicle sales segment, capturing 37.8% of the segment sales year-to-date, followed by Volkswagen with 24.3% of the market share. Both manufacturers have started the year off on a strong foot that will make it difficult for other manufacturers to catch up. They were followed by Kia and Suzuki with 8.3% and 5.4% of the market, respectively, leaving the remaining 24.3% of the market to other brands.

On a year-to-date basis, Toyota remained the leader in the light commercial vehicle space with a dominant 57.2% market share. Ford came in second place claiming a market share of 8.2%. Mercedes and Toyota continued to collectively lead the medium commercial vehicle market, each with a market share of 27.0%. Mercedes also claimed the top spot of heavy and extra-heavy commercial vehicles with a market share of 28.1%. 

The Bottom Line  

February’s new vehicle sales figure of 1,103 was the highest number since November 2018 when 1,197 new vehicles were sold. The month-on-month increase was mainly driven by the 211 unit increase in commercial vehicle sales, although the 83 unit increase in passenger vehicle sales is by no means insignificant. As mentioned in last month’s report, the 12-month new vehicle sales cumulative figure is trending at levels last seen in 2019. February’s 12-month cumulative figure is still down 50.4% from the peak of 22,664 recorded in April 2015, but the strong momentum in both the passenger- and commercial vehicle segments is encouraging to see.