Category Archives: Economic Research

Economic Research

NCPI October 2022

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Namibia’s annual inflation rate remained steady at 7.1% y/y in October. On a month-on-month basis, prices in the overall NCPI basket rose 0.2% m/m. On an annual basis, overall prices in five of the twelve basket categories rose at a quicker rate in October than in September, five categories recorded a slower rate of inflation and two recorded inflation rates consistent with those in September. Prices for goods increased by 9.7% y/y, slightly slower than the 9.8% y/y increase reported last month. Prices for services increased by 3.4% y/y, the quickest annual rise since December 2019.

Transport remains the largest contributor to the annual inflation rate, contributing 2.6 percentage points to the annual inflation rate in October. On a month-on-month basis, prices in this basket item declined for a second consecutive month after falling by 0.7% m/m in October. The decline was somewhat expected given the 100c per litre drop in the petrol price that came into effect in early October, following an even larger reduction in overall fuel prices in the month prior. Prices in the operation of personal transport equipment sub-category declined by 1.3% m/m in October while on an annual basis inflation in this category slowed to 26.8% y/y from 30% y/y in September. We expect inflation for this sub-category to pick up again in November following the 198c per litter increase in the price of Diesel that came into effect earlier this month. Prices in the public transportation services sub-category climbed by 0.4% m/m and 6.8% y/y whilst prices in the purchase of vehicles sub-category rose by 0.1% m/m and 3.4% y/y. Overall, prices in the transport basket rose by 17.8% y/y in October.

Food & non-alcoholic beverages were the second biggest contributor to annual inflation, contributing 1.7 percentage points to October’s annual inflation print. Overall, prices in this basket item rose 0.7% m/m and 9.1% y/y. All thirteen sub-categories in this basket item recorded price increases on an annual basis for the 10th consecutive month in October. Oils and fats again saw the largest price increase on an annual basis, rising 25.5% y/y, followed by fruit prices which rose by 21.6% y/y.

Alcohol & tobacco contributed 0.9 percentage points to October’s annual inflation print. Overall prices in the basket category rose by 0.4% m/m and 6.7% y/y, the quickest year-on-year increase since October 2017. The alcoholic beverages sub-category printed inflation of 0.6% m/m and 7.4% y/y, while the prices of tobacco products fell by 0.1% m/m but increase by 3.7% y/y.

Overall, the transport-, food- and alcohol and tobacco categories accounted for 73% of October’s inflation rate and remain the most influential drivers to Namibia’s inflation print, with the other 9 categories contributing the remaining 27%.

Namibia’s October annual inflation print at 7.1% continued to trend above the SARB’s target ceiling of 6.0% for the 4th consecutive month. South Africa by comparison saw its CPI print slow for a second consecutive month in September, but at 7.5% remains notably above the upper limit of the SARB’s target range. We expect both the SARB and the Bank of Namibia (BoN) to maintain a hawkish monetary stance for as long as inflation remains elevated above the target range. November’s diesel price increase will certainly not assist in alleviating inflationary pressures in the short run and may prolong the BoN’s fight in bringing inflation back within acceptable levels. IJG’s inflation model currently forecasts Namibia’s annual inflation rate to stay elevated above the upper target limit for the remainder of 2022, and for it to end the year at around 6.6%. 

New Vehicle Sales – October 2022

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A total of 996 new vehicles were sold in October, a 2.2% m/m contraction but an increase of 38.7% y/y from the 718 vehicles sold in October 2021. Year-to-date 8,928 new vehicles have been sold, of which 4,541 were passenger vehicles, 3,818 light commercial vehicles, and 569 medium and heavy commercial vehicles. On a twelve-month cumulative basis, a total of 10,417 new vehicles were sold at the end of October, representing an 11.5% y/y increase from the 9,343 sold over the comparable period a year ago.

466 new passenger vehicles were sold during the month, a 7.7% m/m contraction from the 505 sold in September, but a 29.4% y/y increase from the 360 vehicles sold in October 2021. Toyota’s sales accounted for 46.6% of the new passenger vehicles in October. On a 12-month cumulative basis, new passenger vehicle sales have increased by 19.6% y/y to 5,282, the highest level since March 2018. Year-to-date, new passenger vehicle sales rose to 4,541, an increase of 21.3% from the 3,743 vehicles sold during the same period last year.

530 new commercial vehicles were sold in October, representing an increase of 3.3% m/m and 48.5% y/y, the highest year-on-year growth rate since May 2021. The year-on-year increase was almost exclusively driven by an increase in light commercial vehicle sales, with medium- and heavy commercial vehicle sales roughly in line with last year. Light commercial vehicles sales rose by 55.9% y/y to 460, medium commercial vehicle sales rose by 9.1% y/y to 24, and heavy commercial vehicles sales increased by 15.0% y/y to 46. On a twelve-month cumulative basis, light commercial vehicle sales increased by 6.4% to 4,449, while medium commercial vehicle sales fell by 1.6% to 186 and heavy commercial vehicles decreased by 9.4% to 500.

Toyota continues to lead the new passenger vehicle sales with 32.9% of the segment sales year-to-date, followed by Volkswagen with 22.2% of the market share. The two top brands continue to maintain their large gap over the rest of the market, followed by Kia and Suzuki with 9.1% and 7.7% of the market, respectively, leaving the remaining 28.2% to other brands.

On a year-to-date basis, Toyota maintained its dominance in the light commercial vehicle space with 47.5% market share, followed by Nissan with 12.0% of the market. Hino continues to lead the medium commercial vehicle segment with 32.7% of sales year-to-date. In the heavy and extra-heavy commercial vehicle market, Scania retained its position as leader with 26.3% market share.

The Bottom Line

New vehicle sales declined marginally to 996, following August and September new vehicle sales that breached the 1,000 mark. The year-to-date chart at the top of this report shows that new vehicle sales have recovered well this year and are very much in line with the numbers last seen in 2019. October’s new passenger vehicle sales figure of 466 was marginally above the 454 average monthly figure witnessed so far this year. By comparison, the average monthly passenger vehicle sales figure in 2021 was 373. On a 12-month cumulative basis, new passenger vehicle sales of 5,282 are in line with the numbers seen in 2018. New commercial vehicle sales have similarly recovered, but October’s 12-month cumulative figure of 5,135 still lags the pre-pandemic 2019 average of 6,300. Still, monthly new commercial vehicle sales have averaged 439 this year, compared to 412 in 2021 and 367 in 2020, with October’s 530 sales well above this year’s monthly average.

PSCE – September 2022

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Private sector credit (PSCE) rose by N$351.1 million or 0.32% in September, bringing the cumulative credit outstanding to N$109.5 billion after normalising for claims on non-resident private sectors consisting of interbank swaps. On a year-on-year normalised basis, private sector credit grew by 3.6% y/y in September, compared to the 4.1% y/y growth recorded in August. On a 12-month cumulative basis, N$4.27 billion worth of credit was extended to the private sector. Of this cumulative issuance, individuals took up N$1.70 billion while corporates borrowed N$2.57 billion.

Credit Extension to Individuals

Credit extended to individuals increased by 0.5% m/m and 2.8% y/y in September. Mortgage loans to individuals posted growth of 0.3% m/m and 1.9% y/y. Overdraft facilities to individuals grew by 1.3% m/m but contracted by 1.1% y/y. Other loans and advances (consisting of credit card, personal and term loans) rose by 1.5% m/m and 8.6% y/y. Instalment and leasing sales fell by 0.1% m/m and 1.0% y/y.

Credit Extension to Corporates

Credit extended to corporates grew by 0.7% m/m and 5.9% y/y in September, following the 8.3% y/y increase recorded in August.  According to the BoN, the decrease is attributable to reduced demand and debt reduction by corporates in the construction and services sector. Mortgage loans contracted by 1.4% m/m but rose 13.1% y/y while overdrafts rose 0.3% m/m but contracted by 2.5% y/y. Other loans and advances rose by 1.0% m/m and 16.6% y/y. Instalment credit increased by 0.8% m/m and 15.4% y/y. The growth in instalment credit is attributed to rising new vehicles sales.

Banking Sector Liquidity

The overall liquidity position of the commercial banks continued to drop from the elevated levels reached in June this year. September saw the banking liquidity position fall by N$1.08 billion to an average of N$3.04 billion before ending the month at N$2.78 billion. The BoN ascribed the decline to withdrawals by other financial corporations coupled with increased cross-border payments amidst a rise in import costs.

Reserves and Money Supply

Broad money supply (M2) rose by N$5.17 billion or 4.2% y/y to N$128.3 billion, according to the BoN’s latest monetary statistics. The BoN noted that the growth in M2 comes on the back of sustained growth in both net foreign assets and domestic claims of the depository corporations in the form of credit extended to the household sector. Foreign reserve balances rose by 2.1% m/m or N$982.22 million to a total of N$48.0 billion. The rise was attributed to revaluation gains and increased portfolio investment during the period.

Outlook

September’s PSCE growth somewhat slowed when compared to August. The lower growth in PSCE was attributable to lower demand and deleveraging by the corporate sector, more specifically corporates in the construction and services sectors, according to the BoN. PSCE growth is expected to remain tepid amidst elevated inflation and rising interest rates to tame inflation over the near term. As expected, the BoN hiked interest rates by another 75 basis points at its MPC meeting held on 26 October. Another hike in the neighbourhood of either 50 or 75 basis points is on the cards by year-end and will further stretch already indebted consumers and dent demand for new credit uptake in our view.