Category Archives: Economic Research

Economic Research

Building Plans – August 2022

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The City of Windhoek approved a total of 232 building plans in August, representing a 21.6% m/m decrease from the 296 building plans approved in July. In value terms, the approvals were valued at N$226.3 million, a 19.8% decline from the N$282.0 million approved in July. So far in 2022 there have been 1,667 approvals, worth N$1.26 billion. This year-to-date figure is 4.8% higher in number terms and 1.2% higher in value terms than at the same time last year. On a twelve-month cumulative basis, the number of approvals has risen by 0.4% y/y to 2,527 but the value of these approvals has declined by 2.3% y/y to N$1.98 billion. The number of completions for August came in at 79, valued at N$79.0 million.

Additions to properties made up the largest portion of approvals in both number and value terms. 169 additions to properties were approved valued at N$147.8 million, decreasing by 5.6% m/m in number terms but increasing 37.9% m/m in value terms, the highest value of approvals in a single month since January 2018. It should however be noted that N$100 million worth of additions to the Lady Pohamba Hospital in Kleine Kuppe alone made up 67.7% of this total. Year-to-date 1,093 additions to properties have been approved with a value of N$642.5 million, an 11.2% y/y increase in number terms and a 37.9% y/y increase in value terms. 37 Additions worth N$19.6 million were completed in August.

New residential units were the second largest contributor to the number and value of building plans approved with 55 approvals registered in August compared to 112 in July. In value terms N$40.9 million worth of residential units were approved in August, an 75.8% m/m decrease from the high base in July, and a 51.4% y/y decline. On a 12-month cumulative basis, the number of residential units approved fell by 12.6% y/y to 801. 25 New residential units worth N$19.0 million were completed during August, a 26.7% m/m decrease in value terms.

8 New commercial and industrial units valued at N$37.7 million were approved in August. This compares to 5 units valued at N$20.4 million in August 2021 and is the highest number of approvals since February 2020. Year-to-date there have been 30 commercial and industrial building approvals valued at N$101.1 million, translating to a 20.0% y/y increase in number, and a 15.1% y/y increase in value terms compared to the same period last year. On a rolling 12-month perspective, the number of commercial and industrial approvals increased to 42 units worth N$184.6 million, compared to the 34 approved units worth N$143.0 million over the corresponding period a year ago. One commercial and industrial unit worth N$2.2 million was completed in August.

As shown in the figure above, the cumulative value of building plans approved has been ticking up slightly in nominal terms in recent months but continues to trend down in inflation-adjusted terms The 12-month cumulative value of plans completed however continues trend down in both nominal and real terms, as shown in the graph below.

On a 12-month cumulative basis, 2,527 building plans to the value of N$1.98 billion were approved which represents a 0.4% y/y increase in number terms but a 2.3 y/y decrease in value terms. Additions to properties continue to make up most of the cumulative approvals at 66.6% in number terms. The number of commercial and industrial approvals have increased by 23.5% y/y on a 12-month cumulative basis, despite remaining in a single-digit territory since March 2020, indicating that it is from a very low base. As mentioned earlier, the 8 commercial building plan approvals in August was the highest since February 2020. While the number of approvals of a single month cannot be used to infer a change in trend, the relatively high number of commercial approvals in August is still encouraging as it indicates that some corporates are expanding their operations. Completed building plans increased by 29.4% y/y in value terms to N$984.0 million on a 12-month cumulative basis, the first increase since June 2021.

New Vehicle Sales – August 2022

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1,051 new vehicles were sold in August, representing a 55.2% m/m increase from the 677 sold in July and a 37.9% y/y increase from the 762 new vehicles sold in August 2021. Year-to-date 6,915 new vehicles have been sold, of which 3,574 were passenger vehicles, 2,907 light commercial vehicles, and 434 medium and heavy commercial vehicles. In comparison, 6,454 new vehicles were sold by August 2021. 2022’s new vehicle sales are very much in line with 2019’s, as the figure below shows. On a 12-month cumulative basis, a total of 9,889 new vehicles were sold as at August 2022, representing a 6.4% y/y increase from the 9,293 new vehicles sold over the comparable period a year ago.

519 new passenger vehicles were sold during August, an increase of 35.9% m/m from the 382 sold in July, and a 53.6% y/y increase from the 338 new vehicles sold in August 2021. Volkswagen and Toyota were the biggest contributors to the increase in monthly new passenger vehicles in August. Year-to-date, new passenger vehicle sales rose to 3,574, an increase of 19.0% from the 3,003 sold during the same period last year. On a 12-month cumulative basis, new passenger vehicle sales rose by 18.8% y/y to 5,055, the highest level since December 2018, some 44 months ago.

532 new commercial vehicles were sold in August, representing an increase of 80.3% m/m and a 25.5% y/y. While all three sub-categories recorded better sales than last month, the month-on-month increase was largely driven by an increase in light commercial vehicle sales, following a recovery in sales by Toyota. Light commercial vehicle sales rose by 31.4% y/y to 465, medium commercial vehicle sales climbed by 12.5% y/y to 18 while heavy commercial vehicles fell by 9.3% y/y to 49. On a twelve-month cumulative basis, light commercial vehicle sales decreased by 4.6% y/y to 4,137, medium commercial vehicles fell by 2.7% y/y to 179, while heavy commercial vehicles rose by 0.2% y/y to 518.

Toyota retained its lead in the new passenger vehicle sale segment, claiming 29.6% of the sales on a year-to-date basis, followed by Volkswagen with a 23.3% share, slightly higher from the previous month. The two top brands maintained their large gap over the rest of the market with Kia and Suzuki following with 9.2% and 8.2% of the market, respectively, leaving the remaining 29.7% of the market to other brands.

On a year-to-date basis, Toyota also maintained its dominance in the light commercial vehicle space with a 45.9% market share, followed by Nissan with 13.5%. Hino continues to lead the medium commercial vehicle segment with 28.6% of year-to-date sales, followed by Mercedes-Benz with 21.9% market share. In the heavy and extra-heavy commercial vehicle market, Scania retained its position as the leader with 30.7% market share.

The Bottom Line

New vehicle sales recovered materially this month, breaching the 1,000 level for the first time since March. As previously mentioned, the growth was largely driven by a rebound in sales from Toyota in particularly the passenger- and light commercial categories, due to the recommencement of production at the KwaZulu Natal production plant, although Volkswagen also recorded a robust increase in passenger vehicle sales. On a 12-month cumulative basis, new passenger vehicle sales breached the 5,000 mark for the first time since May 2019 and is edging towards 2018 levels. New commercial vehicles sales however continue to hover around the 4,800 level on a 12-month cumulative basis, where it has been trending for the past year.

PSCE – July 2022

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Overall

Private sector credit (PSCE) rose by N$342.9 million or 0.3% m/m in July, bringing the cumulative credit outstanding to N$116.2 billion. On a year-on-years basis, private sector credit grew by 10.6% y/y. Normalising for the large increases in claims on non-resident private sectors observed between January and March this year sees PSCE growth at 3.5% y/y. Cumulative credit extended to the private sector over the last 12-months amounted to N$11.1 billion, up 287.2% y/y over the same period last year (26.7% y/y on a normalised basis). Claims on non-resident private sectors have taken up the bulk of the issuance with debts over the past 12 months summing to N$6.97 billion or 63% of the total debt issuance, followed by corporates which took up N$2.84 billion (or 26%) and individuals at N$1.32 billion (12%).

Credit Extension to Individuals

Credit extended to individuals increased by 0.1% m/m and 2.2% y/y in July, due to an increased demand in mortgage credit and ‘other loans and advances’ according to the BoN. Mortgage loans to individuals rose by 0.4% m/m and 1.9% y/y. Other loans and advances (consisting of credit card debt, personal- and term loans) increased 1.0% m/m and 7.9% y/y. Annual growth in other loans and advances to individuals has steadily been ticking up since November last year, with July’s print the quickest since October 2020. Overdraft facilities however contracted by 7.8% m/m and 10.7% y/y, following a 2.1% m/m and 3.0% y/y contraction in June.

Credit Extension to Corporates

Credit extended to corporates contracted by 6.5% y/y in July, following the 5.2% y/y increase recorded in June. On a month-on-month basis, credit extension to corporates rose by 0.7% m/m. According to the BoN, the increase was due to a rise in demand for mortgage credit and other loans and advances from corporates in the mining-, health-, and services sectors. Mortgage loans contracted by 1.0% m/m but rose 4.6% y/y while other loans and advances rose by 0.01% m/m and 15.7% y/y. Instalment credit increased by 1.6% m/m and 14.9% y/y. Overdrafts rose by 4.1% m/m but fell 6.1% y/y, the ninth consecutive month that overdraft facilities to corporates recorded a decline on an annual basis.

Banking Sector Liquidity

The overall liquidity position of the commercial banks rose significantly in July, rising by N$1.4 billion to an average of N$6.5 billion, and ended the month at N$10.2 billion. According to the BoN, the increase is partly attributed to an increase in diamond sales proceeds and from investment liquidations by other non-banking financial corporations. The repo balance subsequently fell to N$293.0 million at the end of the month, after ending at N$488.0 million in June.

Reserves and Money Supply

The Bank of Namibia’s latest figures show Broad Money Supply rising significantly by N$6.5 billion or 11.0% y/y to N$134.9 billion in July. The increase in the M2 growth was ascribed to a rise in the net foreign assets of depository corporations, as well as growth in domestic claims on other sectors. Foreign reserves rose by 7.1% or N$3.3 billion, the quickest growth in 13 months, to N$49.2 billion. The BoN attributes the boost to the increase in commercial banks foreign currency and SACU receipts.

Outlook

Normalised PSCE growth has steadily been ticking up from the lows of 2021, but remains about half the rates seen prior to the pandemic. With economic activity expected to remain relatively muted over the short- to medium term, we do not expect to see drastic increases in PSCE growth soon. We do however expect to see additional rate hikes by both the SARB and the BoN over the coming months, as inflationary pressures remain high.

Ultra-accommodative interest rates over the past two years provided relief to indebted consumers, but did not stimulate credit uptake, as evidenced by the low PSCE growth figures since the start of the Covid-19 pandemic when the central bank aggressively cut rates. Even with another 75 – 100 bp worth of increases, local interest rates will still be accommodative by historical standards. We could possibly see commercial banks being more willing to extend credit in the rising interest rate environment as they experience margin expansion, provided that they do not expect non-performing loans to increase.