Category Archives: Economic Research

Economic Research

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.

Building Plans – December 2022

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The City of Windhoek approved 110 building plans in December, representing a 42.4% m/m decline from the 191 building plans approved in November. In value terms, the approvals were valued at N$48.6 million, down 58.3% m/m from the N$134.6 million worth of plans approved in November. In total, 2,467 buildings worth N$1.75 billion were approved in 2022, representing an increase of 0.7% y/y in terms of the number of plans approved but a 10.6% y/y contraction in value terms when compared to 2021, and the lowest value since 2011. 79 building plans valued at N$39.1 million were completed in December, bringing the total number of plans completed in 2022 to 1,020 valued at N$653.2 million, the lowest value since 2017.

December saw 83 additions to properties approved valued at N$20.95 million, compared to the 148 units worth N$80.91 million approved in November. In total, 1,675 additions to properties valued at N$886.7 million were approved in 2022, representing a 6.4% y/y increase in the number of plans approved and a 17.8% y/y surge in value terms when compared to 2021. 10 additions worth N$2.47 million were completed in December, notably below the 36 average monthly additions completed in 2022. Overall, 505 additions worth N$140.6 million were completed in 2022, 365 fewer and N$96.8 million less than last year and has been falling since 2018.

Only 24 new residential units valued at N$23.7 million were approved in December, which is the lowest monthly approval number for the year and a decrease of N$35.0 million compared to the average monthly approvals of N$58.7 million. Overall, 735 residential units worth N$704.1 million were approved in 2022, representing a 15.55 y/y decline in number terms and a 32.2% y/y drop in value terms from the year prior. 69 New residential units valued at N$36.67 million were completed during December, exceeding the 41 worth N$33.62 million completed on average each month during 2022. In total, 493 new residential units valued at N$403.4 million were completed over the course of 2022.
Only 3 new commercial and industrial units were approved in December, bringing the total number of approvals in 2022 to 57, 20 more than a year ago. In value terms, N$4.0 million worth of new commercial and industrial units were approved during the month, taking the total value of new commercial and industrial unit approvals to N$162.9 million for the year. On average, 5 new commercial and industrial units valued at N$13.6 million were approved each month in 2022. While no new commercial and industrial units were completed in December, the number of units completed during 2022 adds up to 22 worth N$109.3 million, representing a 120% increase in number terms but a 65.2% contraction in value terms compared to 2021.
December saw the 12-month cumulative value of building plans approved continue to fall in both nominal and inflation-adjusted terms, as depicted in the figure above. The 12-month cumulative value of both commercial and residential units approved fell in December with the latter contracting for the 9th consecutive month on an annual basis.

As displayed below, the 12-month cumulative value of completed plans also contracted in both nominal and real terms during the month. December also saw the 12-month cumulative number of building plans completed contract for the 20th consecutive month when compared to the number of plans completed over the same period a year ago.

Overall, the construction of new buildings hit a 11-year low in 2022 with the annual value of building plans approved the lowest since 2011. While construction activity in the private sector remains weak, some recovery in activity has been observed in the government sector. According to the Bank of Namibia’s December 2022 Quarterly Bulletin, the government’s expenses reserved for public construction work programmes grew in real terms by 22.9 q/q and 11.5% y/y during Q3 of 2022. Whether this increased investment in construction work by the government will continue over the near term, however, remains to be seen.

While high construction costs continue to weigh on the depressed activity in the sector, the Namibian Statistics Agency’s Q3 PPI data shows that local prices of cement lime and plaster have dropped over the first three quarters of 2022, falling by 11.2% q/q in Q3 alone. However, the 2.6% increase in the minimum wage bill for workers in the construction sector that came into effect in December will all but ease inflationary pressures on the cost of construction over the near term.

Going forward, we see little that will stimulate construction activity in the short-term. Instead, we are of the view that demand will remain depressed under the current economic climate characterised by low economic growth, relatively high inflation, and rising borrowing costs.

New Vehicle Sales – December 2022

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A total of 952 new vehicles were sold in December, down 8.9% m/m from the 1,045 vehicles sold in November, but an increase of 29.7% y/y from the 734 vehicles sold in December 2021. In total, 10,925 new vehicles have been sold in 2022, up by 15.9% y/y from the 9,973 vehicles sold in 2021 and the highest annual number of new vehicles sold since 2019. Of the total vehicles sold during the year, 5,576 were passenger vehicles, 4,638 light commercial vehicles, and 711 medium and heavy commercial vehicles.

504 new passenger vehicles were sold during November, 27 fewer than the 531 sold a month earlier, but an increase of 39.2% y/y from the 362 vehicles sold in December 2021. Toyota was the best seller in this segment after accumulating 31.3% of the sales in December. Volkswagen came in second place with 15.5% of December’s new passenger vehicle sales, followed by Land Rover which saw 65 new vehicles sold – notably more than it has sold for the whole of 2021. New passenger vehicle sales grew by 24.4% y/y in 2022 when compared to the 4,484 new vehicles sold a year prior. With 5,576 new vehicles sold in 2022, the year ended with the highest annual number of passenger vehicles sold since 2016.

448 new commercial vehicles were sold in December, 66 fewer than in November but up by 20.4% y/y from the 372 vehicles sold in December last year. Light commercial vehicle sales dropped by 16.6% m/m to 373 but rose by 18.4% y/y. Medium commercial vehicle sales climbed for the sixth consecutive month, growing by 34.6% m/m to 35, the highest number of medium commercial vehicles sold in a single month since July 2019, and almost double the number sold in December 2021. Heavy commercial vehicle sales remained steady after 40 vehicles were sold, one fewer than last month and slightly below the 42 sold on average in 2022. In total, 4,638 light commercial vehicles were sold in 2022, up by 11.0% y/y from the 4,178 sold in 2021. The total number of medium commercial vehicles sold during the year grew by 3.9% y/y after 211 vehicles were sold in this segment in 2022. The total number of heavy commercial vehicles sold in 2022 however contracted by 11.0% y/y to 500.

Toyota was the best seller in the new passenger vehicle sector with 33.0% of the segment’s sales in 2022. This a remarkable feat considering that Toyota had production challenges on some of their key models due to flood damage at its plant in KwaZulu-Natal for an extended period during the year. Volkswagen was the runner-up with 20.9% of the market share, followed by Kia and Suzuki with 9.3% and 7.5% of the market share, respectively. The other manufacturers, including Hyundai and Haval, consumed the remaining 29.4%.

Toyota was also the top seller in the light commercial vehicle space with 48.1% of the segment’s sales in 2022, followed by Ford with 12.3% of the market share and Nissan with 11.4%. Hino was the best seller in the medium commercial vehicle segment with 30.3% of the segment’s sales in 2022, followed by Mercedes with 26.1% of the market share and Toyota with 16.1%. In the heavy and extra-heavy commercial vehicle market, Scania came out on top with 26.2% of the market share in 2022, followed by Volvo Trucks with 21.0% of the market share and Mercedes with 14.4%.

The Bottom Line  

The 952 vehicles sold in December was the highest number recorded for the month of December since 2015 and pushed the total annual vehicle sales number to pre-pandemic levels, and above the 10,000 level for the first time since 2019, as shown in the year-to-date chart at the beginning of this post. Both passenger and commercial vehicle sales recorded strong growth in 2022. Sales in the heavy commercial vehicle segment contracted in 2022, following a strong recovery in 2021, while the light and medium commercial vehicle segments reported healthy sales growth for the year. Overall, the recovery of new vehicle sales in 2022 was remarkable to see against a backdrop of rising interest rates, and despite being a challenging economic year. But new vehicle sales continue to trail the levels seen prior to 2019 as the chart below depicts.