Category Archives: Economic Research

Economic Research

NCPI January 2023

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The Namibian annual inflation rate rose to 7.0% y/y in January on the back of the 6.9% y/y increase in prices recorded in December. On a monthly basis, prices in the overall NCPI basket rose by 1.1%, compared to a 0.3% m/m increase in December. On a year-on-year basis, overall prices in eight of the twelve basket categories rose at a quicker rate in January than in December, while the other four recorded slower rates of inflation. Prices for goods increased by 9.8% y/y while prices for services rose by 3.1% y/y.

Inflation Attribution

Food and non-alcoholic beverages prices rose 14.0% in January from a year earlier. The basket category, accounting for 16.4% of the NCPI basket , contributed 2.6 percentage points to the annual inflation rate in January. This marks the first month since August 2021 that the transport category was not the top contributor to the annual inflation rate. Month-on-month food and non-alcoholic prices rose by 2.4%, the highest since March 2016. Fruit price inflation ticked up for a second consecutive month to 22.3% y/y, with citrus prices rising by 23.8% y/y, grapes by 6.7% y/y and avocados logging 64.2% y/y. The prices of breads and cereals rose by 3.0% m/m and 22.3% y/y, emanating from maize prices that are 37.2% higher than a year ago, and bread- and cake flour being 27.1% more expensive. The only sub-category to record slower inflation on an annual basis than last month was ‘oils and fats’ which posted inflation of 16.8% y/y, the lowest since March 2022. 

Transport was the second largest contributor to January’s annual inflation print, contributing 1.64 percentage points. Prices in this category rose by 11.1% y/y, the lowest since October 2021. On a month-on-month basis, transport prices fell by 3.2%, following the Ministry of Mines and Energy’s decision to lower the prices of both petrol and diesel in the beginning of January. This resulted in the operation of personal transport equipment inflation slowing to 15.9% y/y from the 22.6% recorded in December. The Ministry’s decision in the beginning of February to leave fuel prices unchanged should aid to further ease price pressure in this category. Prices of the purchase of vehicles sub-category ticked up for a fourth consecutive month to 1.3% m/m and 6.2% y/y. Public transportation services inflation remained relatively steady month-on-month and eased to 0.9% y/y from 1.4% in December. 

The alcohol and tobacco category posted inflation of 2.5% m/m and 5.8% y/y. The prices of alcoholic beverages climbed by 3.0% m/m and 6.5% y/y. The acceleration from December’s 4.5% y/y rate was mainly driven by the prices of white spirits that are 24.7% higher than a year ago. Tobacco products recorded price increases of 0.2% m/m and 2.7% y/y, with cigarette prices up 5.3% y/y while pipe tobacco prices are down 4.2% y/y.

Outlook

Namibia’s annual inflation rate of 7.0% in January came in moderately higher than South Africa’s rate of 6.9%, for the first time since April 2019. Lower fuel prices helped to tame inflationary pressure, but stubbornly high food inflation (the highest since March 2009 on an annual basis) continued to put upward pressure on the overall inflation print. 

While the housing, water & electricity category’s contribution to the annual rate, at 0.7 percentage points, was relatively low, it is worth noting that the prices for the rental payments for dwellings subcategory rose by 2.1% y/y from 1.4% y/y previously. As rental payments make up a large portion (23.3%) of the CPI basket, the low inflationary adjustment means that Namibia’s annual inflation is likely to moderate throughout the year, provided that transport inflation continues to slow. IJG’s inflation model currently forecasts Namibia’s annual inflation rate to steadily slow during the course of 2023, before reaching around 4.3% at the end of the year.

The Bank of Namibia (BoN) in its monetary policy committee today (15 February 2023) raised the repo rate by a further 25bps to 7.00%, in line with the SARB’s hike in January. Forward-rate agreements, which are used to speculate on future borrowing costs, show traders are pricing in one more 25 basis-point increase by the SARB in the current rate-hiking cycle. Should the BoN follow suit, it will take the Namibian repo rate to 7.25%, the highest since May 2009. 

New Vehicle Sales – January 2023

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A total of 798 new vehicles were sold in January, which is 154 fewer than were sold in December, but represents a 12.7% y/y increase from the 708 new vehicles sold in January 2022. On a twelve-month cumulative basis, a total of 11,013 new vehicles were sold up to the end of January 2023, representing an increase of 16.6% from the 9,442 new vehicles sold over the same 12-month period a year ago. 2023 is off to a decent start with January’s new vehicle sales up for the 5th consecutive year.

468 New passenger vehicles were sold during January, a decrease of 7.1% m/m from the 504 sold in December, but 15.0% higher y/y from the 407 new passenger vehicles sold in January 2022. On a rolling 12-month basis, new passenger vehicle sales rose 24.2% y/y at the end of January. 12-month cumulative passenger vehicle sales continue to trend higher and are up by 77.0% from the pandemic low, trending at levels last seen in 2017.

Commercial vehicle sales declined to 330 units in January, representing a contraction of 26.3% m/m but is 9.6% higher year-on-year from the 301 new commercial vehicles sold in January 2022. During the month, 294 light commercial vehicles, 12 medium commercial vehicles, and 24 heavy commercial vehicles were sold. On a year-on-year basis, light commercial sales rose by 10.5% y/y, medium commercial vehicles grew by 140.0% y/y, and heavy and extra heavy vehicle sales declined by 20.0% y/y. 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 12.6% y/y, medium commercial vehicles sale rising by 9.5% y/y, while heavy commercial vehicle sales contracted by 12.3% y/y.

Both Toyota and Volkswagen started the new year strong and collectively sold more than half of the new passenger vehicles in January. Toyota captured the largest portion with 38.2% of the market share, followed by Volkswagen with 22.6%. Kia and Haval were the best of the rest, taking 8.8% and 5.1% of the market share, respectively. The other manufacturers consumed the remaining 25.2%.

Toyota also started the year off with a solid grip on the light commercial vehicle segment with a 53.4% market share. Ford came in second place with 8.5% of the market share, followed by Isuzu and Mahindra, with 6.8% each. Mercedes and Toyota collectively led the medium commercial vehicle market, each with a 33.3% market share during the month. Mercedes was also number one in the heavy and extra-heavy commercial vehicle segment, after taking 33.3% of the market share in January, followed by Scania with 16.7% of the market share during the month.

The Bottom Line  

New vehicle sales started the year off on a solid footing. January’s new vehicle sales are the strongest start to a new year since 2018 with just under 800 vehicles sold during the month. Both passenger and commercial segments grew year-on-year in January and sales in both categories continued to rise on a 12-month cumulative basis during the month. Commercial vehicle sales growth is mainly being driven by light- and medium commercial vehicle sales, while the ‘heavy’ segment recorded lower 12-month cumulative sales for a 5th consecutive month.  

The 12-month cumulative new vehicle sales figure of 11,013 is trending at levels last seen in 2019. While this is still less than half the high of 22,664 recorded in April 2015, the relatively strong sales figure reported for January is encouraging, considering that vehicle prices and borrowing costs have risen considerably over the past twelve months.

PSCE – December 2022

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Private sector credit (PSCE) rose by N$377.5 million or 0.3% m/m in December, bringing the cumulative credit outstanding to N$118.2 billion on a normalised basis (removing the interbank swaps accounted in non-resident private sector claims). PSCE grew by 3.9% y/y in 2022, following the 1.0% y/y increase in 2021. On a 12-month cumulative basis, N$4.10 billion worth of credit was extended to the private sector. Of this cumulative issuance, individuals took up N$2.93 billion and corporates increased their borrowings by N$1.55 billion.

Credit Extension to Individuals

Credit extended to individuals rose by 0.7% m/m and 4.8% y/y in December. The month-on-month growth was mainly driven by ‘Other loans and advances’, made up of credit card debt, personal- and term loans, which grew by 1.9% m/m and 15.7% y/y. The annual growth rate of this line item has been ticking up for four consecutive months, with the December growth rate being the highest since June 2020. Overdraft facilities to individuals grew by 1.9% m/m but fell 0.4% y/y, while mortgage loans rose by 0.3% m/m and 2.8% y/y. Instalment credit grew by 0.6% m/m and 2.7% y/y.

Credit Extension to Corporates

Credit extended to corporates fell by 0.2% m/m during the month. On an annual basis, corporate credit grew by 3.5% y/y in 2022, following contractions in both 2020 and 2021. Mortgage loans fell by 0.3% m/m and 3.8% y/y, declining on an annual basis for the third consecutive month. Overdraft facilities to corporates fell by 3.6% m/m but grew by 1.1% y/y. Other loans and advances rose by 1.8% m/m and 9.6% y/y, while instalment credit increased by 0.6% m/m and 13.8% y/y.

Banking Sector Liquidity

The overall liquidity position of the commercial banks strengthened further in December, rising by N$1.40 billion to an average of N$5.84 billion. The BoN ascribed the increase to a rise in diamond sales coupled with portfolio rebalancing. The strong liquidity position meant that the repo balance stood at zero at the end of the month.

Money Supply and Reserves

According to the BoN’s latest monetary statistics, Broad Money Supply (M2) rose by N$898.4 million in December to N$130.0 billion, remaining steady from last year. The stock of international reserves increased by 10.6% y/y to N$48.0 billion in December. The BoN attributed the large increase to the inflow of the AfDB loan during the month, as well as diamond sale proceeds and increased net commercial bank inflows.

Outlook

Overall, PSCE growth rebounded in 2022, following two years of very subdued growth. The normalised 12-month issuance of N$4.10 billion is nearly three times higher than the issuance of 2021, and one-and-a-half times higher than that of 2020. Corporate credit issuance was encouragingly positive in 2022, after two years of corporates delevering their balance sheets. The 12 months also saw individuals taking up N$1.66 billion more than they did in 2021.

There is widespread consensus that we are near the peak of the interest rate hiking cycle, as central banks around the world have been moderating their rate hikes in the last two months. While the current hiking cycle has been more rapid than those witnessed in recent years, domestic interest rates are still accommodative by historical standards. At present, the market is pricing in a final 25bp hike by the SARB at its next MPC meeting.