Category Archives: Economic Research

Economic Research

PSCE – January 2023

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Private sector credit (PSCE) increased by N$121.2 million or 0.11% m/m in January, bringing the cumulative credit outstanding to N$110.7 billion on a normalised basis (removing the interbank swaps accounted in non-resident private sector claims). On a year-on-year basis, PSCE grew by 2.6%, compared to the 4.2% y/y growth recorded in December. Over the past 12 months, N$2.79 billion worth of credit was extended to the private sector, a 23.6% increase from the N$2.26 billion issued over the same period a year ago. Individuals took up N$3.06 billion worth of credit, while corporates decreased their borrowings by N$270.3 billion.

Credit Extension to Individuals

Credit extended to individuals rose by 0.6% m/m and 4.9% y/y in January. All sub-categories registered increases on a month-on-month basis, with the monthly growth again primarily driven by an increase in ‘Other loans and advances’ (which is made up of credit card debt and personal- and term loans). The sub-category grew by 1.8% m/m and 17.3%, the highest annual growth since June 2020. Overdraft facilities to individuals rose by 0.9% m/m but fell by 3.1% y/y. Mortgage loans posted 0.3% m/m growth for a third consecutive month, with year-on-year growth remaining steady at 2.8% y/y. Instalment credit grew by 0.2% m/m and 3.1% y/y.

Credit Extension to Corporates

Credit extended to corporates contracted by 0.6% m/m and y/y, the first year-on-year contraction in this category since December 2021. Credit uptake by corporates has been very subdued over the past five months. Only overdraft facilities to corporates grew on a month-on-month basis. The sub-category grew by 4.6% m/m, but fell 9.0% y/y. Mortgage loans contracted on an annual basis for a fourth consecutive month, falling by 2.4% m/m and 4.7% y/y. Instalment credit fell by 1.3% m/m, but remains up by 12.7% y/y.

Banking Sector Liquidity 

The overall liquidity position of Namibia’s commercial banks fell by N$585.1 million to an average of N$5.25 billion in January and ended the month at N$5.92 billion. Despite the strong liquidity position, some banks made use of the repo facility, with the balance coming in at N$380.0 million. The Bank of Namibia (BoN) noted that the decline is in line with historic trends of corporate tax payments and the “holiday season”, with declines usually observed in January to mid-March before accelerated government spending aids increases just before the end of the fiscal year.

Money Supply and Reserves

Broad Money Supply (M2) rose by N$1.24 billion or 1.0% y/y in January, according to the BoN’s latest monetary statistics. The money supply decreased by 0.2% m/m and now stands at N$129.7 billion. The stock of international reserves fell by 3.5% m/m to N$46.3 billion in January. The BoN attributed the decline to net commercial bank outflows during the month. 

Outlook

PSCE growth is off to a subdued start in 2023, with the year-on-year growth figure of 2.6% the slowest since March last year. The slow growth is largely due to low credit uptake by corporates, which has generally been lacklustre since June last year, and it is now starting to reflect in the year-on-year growth figures. This indicates that corporates are not borrowing money to invest in fixed capital projects to expand their operations, an indication of low business confidence.

In January and throughout the past year, individuals have shown a more encouraging uptake of credit compared to corporates, with growth being driven by both short-term ‘other loans and advances’ as well as mortgage loans.

Building Plans – January 2023

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A total of 79 building plans were approved by the City of Windhoek in January, a 28.2% m/m decline from the 110 approved in December. Bar April 2020, which recorded no approvals due to the Covid-19 lockdowns, January’s total number of approvals was the lowest since February 2017. In monetary terms, the approvals were valued at N$22.09 million, the lowest since April 2000, excluding April 2020. On a twelve-month cumulative basis, 2,370 building plans worth approximately N$1.65 billion were approved, representing a decline over the prior 12-month period both in number and value terms of 5.4% y/y and 17.9% y/y, respectively. 62 building plans valued at N$34.7 million were completed during the month. 

In number terms, additions to properties made up the largest portion of approvals. The month of January saw 56 additions to properties worth N$7.6 million getting the nod. A decline of 32.5% m/m in number terms and 63.9% m/m in value terms. In comparison to January 2022, the number of additions to properties in January of this year has decreased by 43.4%, with a corresponding decrease in value of 90.0%. On a 12-month cumulative basis, the number of additions to properties has been hovering around the 1,600 mark since 2018. 19 Additions worth N$7.3 million were completed during the month. 

Only 20 new residential units valued at N$14.3 million were approved in January, which is four fewer than in December, and represents a decline of 73.0% y/y in number of units approved and a 70.0% y/y drop in value terms. To put into perspective just how low January’s new residential approvals were, in 2020, when the Covid-19 lockdowns hampered construction activity, 53 new residential units worth N$68.6 million were approved on average each month. That being said, January is not necessarily a proxy for the annual residential approval numbers, as recent historical data suggests, and we may very well still see an improvement in these numbers going forward. A total of 40 residential units worth N$24.8 million were completed during the month.

3 new commercial and industrial units, worth just N$190,000, were approved in January. This compares to the same number of plans valued at N$4.00 million in December and N$5.53 million in January 2022. On average over the last 20 years, 5 commercial units valued at N$26.7 million were approved in the first month of the year. On a rolling 12-month basis, the number of approvals for this category rose to 57 units worth N$157.5 million as at January, compared to the 39 approved units worth N$169.9 million over the corresponding period a year ago. 3 Commercial units valued at N$2.65 million were completed in January.

In terms of number of building plan approvals in the capital, 2023 is off to the slowest start since 1990, while the value of the total approvals was the lowest for the first month of the year since 2000, even before adjusting for inflation. Building plans approved is a leading indicator of economic activity in the country and the above data implies that certain sectors of the Namibian economy are still showing signs of hardship. 

Notably, the value of new walls approved during the month (which we exclude from our data) was more than five times the value of new commercial and industrial building plans approved. This shows that most businesses do not have immediate plans to expand their existing operations.

There is a possibility that construction activity may increase during the year. However, considering the overall trend of the 12-month cumulative value of approvals over the past couple of years, as illustrated in the graph above, any growth, if at all, will be from an already low base that has been on a declining trend.