Category Archives: Economic Research

Economic Research

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.

New Vehicle Sales – March 2023

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1,226 new vehicles were sold in March, an increase of 11.4% m/m and 16.3% y/y, and the highest monthly total since July 2017. 3,134 new vehicles were sold during the first quarter, of which 1,606 were passenger vehicles, 1,363 light commercial vehicles, and 165 medium- and heavy commercial vehicles. By comparison, the first three months of 2022 saw 2,645 new vehicles sold, indicating a robust start to 2023 for new vehicle sales. On a 12-month cumulative basis, a total of 11,412 new vehicles were sold as at March 2023, representing an increase of 19.3% y/y from the 9,567 sold over the comparative period a year ago.

575 new passenger vehicles were sold during March, representing an increase of 3.2% m/m and 8.7% y/y. Year-to-date, new passenger vehicle sales rose to 1,606 in the first quarter, 16.8% higher than during the same period in 2022 and 42.0% higher than the first quarter of 2021. On a 12-month cumulative basis, new passenger vehicle sales climbed to 5,805, a 22.8% y/y increase from the 4,728 over the corresponding period a year ago.

New commercial vehicle sales were similarly strong in March, with 651 units sold during the month the highest monthly figure since November 2018. New commercial vehicle sales rose 19.7% m/m and 24.0% y/y. 580 light commercial vehicles, 23 medium commercial vehicles, and 48 heavy and extra heavy commercial vehicles were sold during the month. All categories recorded increases on a year-on-year basis, with light commercial vehicles being 24.2% higher than in March 2022, medium commercial vehicles up 53.3% y/y, and heavy and extra heavy up 11.6% y/y. On a twelve-month cumulative basis, light commercial vehicle sales are 20.1% higher than during the corresponding period a year ago, medium commercial vehicle sales are up 21.8% y/y, while heavy commercial vehicle sales contracted by 16.5% y/y.

Toyota continues to enjoy a strong lead in the new passenger vehicle sales segment, claiming 38.0% of the sales on a year-to-date basis, followed by Volkswagen with a 25.1% share. They were followed by Kia and Haval with 8.1% and 5.1% of the market, respectively, leaving the remaining 23.7% of the market to other brands.

Toyota also has a dominant lead in the light commercial vehicle segment with 54.6% of the sales year-to-date. Ford came in second place, claiming a market share of 10.7%. Mercedes leads the medium commercial vehicle segment with a 26.7% market share, while Scania is number one in the heavy- and extra heavy commercial segment with 25.7% of the market share year-to-date.

The Bottom Line  

Demand for new vehicles remained strong in March among all segments. The uptick in March was primarily driven by a 107 unit increase in commercial vehicle sales, supported by a strong passenger figure. The 2023 Q1 new passenger vehicle sales figure is the highest since 2017 and the 12-month cumulative sales figure is trending at its highest level since mid-2017. Q1 new commercial vehicle sales were the highest since 2018 and the 12-month cumulative sales figure is at its highest since March 2020.