Category Archives: Economic Research

Economic Research

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.

Building Plans – July 2022

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A total of 296 building plans were approved by the City of Windhoek during July, representing a 30.4% m/m increase from the 227 building plans approved in June. In value terms, the approvals were valued at N$282.0 million, an increase of 138.5% m/m from a downward revised N$118.2 million in June. Year-to-date 1,435 building plans were approved worth N$1.04 billion, increasing by 7.2% y/y in number terms but declining 4.6% y/y in value terms. On a twelve-month cumulative basis, 2,548 buildings with a combined value of N$1.91 billion were approved, rising by 2.0% y/y in terms of the number of plans approved but declining 3.1% y/y in value terms over the prior 12-month period. 79 building plans worth N$51.2 million were completed during July.

Additions to properties continue to make up the lion’s share of building plans approvals in both number and value terms, as has been the case since the beginning of the year. 179 additions to properties worth N$107.1 million were approved in July, increasing by 17.0% m/m in number terms and 121.2% m/m in value terms from a downward revised N$48.4 million in June. 46 Additions worth N$6.83 million were completed during July.

New residential units were the second largest contributor to the number and value of building plans approved with 112 approvals recorded in July, compared to 69 in June. In value terms, N$168.8 million worth of residential units were approved during the month, a 206.9% m/m increase from June and the highest value since October 2020. On a year-on-year basis, the value of residential unit approvals increased by 110.0%, ending six consecutive months of declines. On a 12-month cumulative basis, residential unit approvals continued to fall, declining by 8.9% y/y in number terms and 19.0% y/y in value terms. 32 New residential units worth N$41.39 million were completed during July, a 30.2% m/m increase in terms of the value, despite declining by 31.9% m/m in terms of the number of units completed.

The number of new commercial and industrial unit approvals remained steady from last month. 5 New commercial units worth N$6.1 million were approved in July, declining 58.9% m/m from the N$14.8 million recorded last month. Year-to-date there have been 22 commercial building approvals worth N$63.4 million, which translates to a 5.9% y/y decline in the value of approvals, despite the number of commercial plan approvals being 10.0% higher y/y. On a rolling 12-month perspective, the number of commercial and industrial approvals increased to 39 units worth N$167.4 million, compared to the 30 units approved worth N$137.6 million over the same period a year ago. Only 1 commercial and industrial unit worth N$3.0 million was completed in July.

The twelve-month cumulative value of both building plans approved and completed ended a 5-months long downward trend both in nominal and inflation-adjusted terms as illustrated in the figures above and below. Despite this uptick, the twelve-month cumulative value of plans approved and completed contracted when compared to the corresponding period a year ago. The twelve-month cumulative value of plans approved declined by 3.1% y/y to N$1.91 billion as noted above, while the cumulative value of plans completed dropped by 6.9% y/y to N$1.01 billion. The twelve-month cumulative number of plans approved at 2,548 is above the twenty-year historical average of 2,447.

New Vehicle Sales – July 2022

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A total of 677 new vehicles were sold in July, representing a 22.4% m/m decline from the 872 new vehicles sold in June, and a 15.3% y/y drop from the 799 new vehicles sold July last year. Year-to-date 5,864 vehicles have been sold of which 3,055 were passenger vehicles, 2,442 were light commercial vehicles, and 367 were medium and heavy commercial vehicles. On a twelve-month cumulative basis, a total of 9,600 new vehicles were sold at the end of July, representing a 5.3% y/y increase from the 9,118 new vehicles sold over the comparable period a year ago.

382 new passenger vehicles were sold in July, the lowest monthly sales figure so far this year, down 11.6% from the 432 passenger vehicles sold in June. Toyota resumed full scale production again in July, after suspending production in April following the floods in KwaZulu-Natal. Despite Toyota ramping up its production at the plant, new passenger vehicles from Toyota declined by 27.1% m/m dipping below the 100 new vehicle sales mark for the second time this year. Year-to-date passenger vehicles sales rose to 3,055 in July, 14.6% higher than during the same period in 2021 and 73.6% higher than the same period in 2020. On a 12-month cumulative basis, new passenger vehicle sales increased by 18.4% y/y to 4,874.

Following the uptick in commercial vehicle sales in June when 440 units were sold, new commercial vehicles sales fell to 295 in July, contracting by 33.0% m/m and 28.2% y/y. Light commercial vehicles continue to make up the bulk of the new commercial vehicle sales with 266 sold in July, followed by 17 heavy and extra heavy commercial vehicles and 12 medium commercial vehicles. Like the passenger vehicle sales, light commercial vehicles from Toyota declined and reached its lowest monthly sales level in two years. Light commercial vehicle sales from Nissan also recorded a sharp decline down 39.7% m/m from June, albeit from a high base. On a twelve-month cumulative basis, light and medium commercial vehicle sales fell 6.5% y/y and 6.3% y/y, respectively, while heavy commercial vehicle sales rose 3.2% y/y.

Despite having lower sales in July, Toyota continues to lead the new passenger vehicle sales segment with 30.3% of the segment sales year-to-date, followed by Volkswagen with 20.9% of the market share. The two top brands maintained their large gap over the rest of the market with Kia and Suzuki following with 9.4% and 8.0% of the market, respectively, leaving the remaining 31.5% of the market to other brands.

On a year-to-date basis, Toyota maintained its dominance in the light commercial vehicle space with a 45.3% market share, followed by Nissan with 14.0%. Hino continues to lead the medium commercial vehicle segment with 28.7% of sales year-to-date, closely followed by Mercedes-Benz with 24.1% market share. Scania retains its position as the leader in the heavy and extra-heavy commercial vehicle segment with 31.4% market share year-to-date.

The Bottom Line

New vehicle sales slumped in July. July’s sales figure is the lowest so far in 2022 but still in line with the monthly average for the year. On a 12-month cumulative basis, new passenger vehicle sales were 0.1% lower than in June, decreasing for the first time after rising for 19 consecutive months, possibly supply side driven by the flood induced problems for Toyota in South Africa. With the Toyota production plant in KwaZulu-Natal having re-commenced production in July, vehicle sales are expected to recover marginally. New commercial vehicle sales also contracted by 5.5% on a 12-month cumulative basis. Overall, year-to-date new vehicle sales are still roughly in line with those of 2021.