Category Archives: Economic Research

Economic Research

NCPI April 2022

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The Namibian inflation rate rose to 5.6% in April, materially quicker than the 4.5% rate recorded in March. Prices in the overall NCPI basket rose by 1.4% m/m, the largest monthly increase since January 2018. On a year-on-year basis, overall prices in seven of the twelve basket categories rose at a quicker rate in April than in March, with two categories recording slower rates of inflation and three categories recorded prices consistent with the prior month. Prices for goods increased by 7.5% y/y while prices for services increased by 3.1% y/y in April.

Rather unsurprisingly, transport was the largest contributor to the annual inflation rate again in April, contributing 2.7 percentage points to the total 5.6% y/y inflation rate. Prices in this category rose by 5.7% m/m and 18.9% y/y. All three sub-categories in this basket item recorded higher inflation on both a monthly and annual basis. The Namibia Statistics Agency’s (NSA) data shows that transport prices were up 9.5% by the end of April. The operation of personal transport equipment sub-category recorded price increases of 8.8% m/m and 27.3% y/y, following the  Ministry of Mines and Energy’s decision to increase petrol and diesel prices by 195- and 295 cents per litre, respectively, in April. Prices of public transportation services rose by 0.1% m/m and 9.8% y/y, in line with the rate recorded last month. The purchase of vehicles sub-category recorded inflation of 1.4% m/m and 5.2% y/y. The Ministry of Mines and Energy’s announcement at the beginning of May to temporarily lower several of the levies charged on fuel for the next three months was welcomed by consumers and businesses alike and should soften the inflationary impact of the high fuel prices to a certain extent.

Food & non-alcoholic beverages was the second biggest contributor to the annual inflation rate in April, contributing 1.1 percentage points. Prices in this basket item rose by 1.4% m/m and 5.7% y/y. As has been the case in the prior three months, all thirteen sub-categories recorded price increases on an annual basis. The largest increases were recorded in the prices of oils and fats which rose by 23.4% y/y, followed by fruit, which recorded prices increases of 13.8% y/y. The NSA’s data shows that consumers in the eastern, southern and western regions of the country paid the highest price for 750ml of pure sunflower oil at N$37.50, followed by the central region at N$32.60, while consumers in the northern parts of the country paid N$29.76. 

Alcohol & Tobacco inflation accelerated from 4.1% y/y in March to 4.5% y/y in April and was the third-largest contributor to April’s annual inflation rate. On a monthly basis, prices in the basket item increased by 0.9% m/m. The prices of tobacco products rose by 3.3% m/m and 6.3% y/y, while the prices of alcoholic beverages increased by 0.3% m/m and 4.1% y/y.

Namibia’s annual inflation rate of 5.6% in April is the highest rate in the last 58 months. Rising food and transport prices remain the primary drivers of the Namibian inflation rate, contributing 67% to the country’s annual rate in April. The uptick in the rate in April means that the 1.4 percentage point differential between Namibia and South Africa’s inflation rates that have been in place since August last year is now significantly smaller. South Africa’s inflation rate came in just below the SARB’s upper end of the target band at 5.9% in March. With inflationary pressure expected to remain high, the SARB’s MPC is expected to hike rates by 25 bps at its May meeting, leaving the BoN with little choice but to follow in-kind in at its MPC meeting June. IJG inflation model currently forecasts inflation to average between 5.0% and 6.2% in 2022. 

New Vehicle Sales – April 2022

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A total of 905 new vehicles were sold in April, a 14.1% m/m contraction but an increase of 19.9% y/y from the 755 vehicles sold in April 2022. Year-to-date 3,550 new vehicles have been sold, of which 1,841 were passenger vehicles, 1,491 light commercial vehicles, and 218 medium and heavy commercial vehicles. By comparison, the first four months of 2021 saw 3,260 new vehicles sold. On a twelve-month cumulative basis, a total of 9,718 new vehicles were sold at the end of April, representing a 13.0% y/y increase from the 8,602 sold over the comparable period a year ago.

466 new passenger vehicles were sold during April, 11.9% lower than the 529 passenger vehicles sold in March, but an increase of 30.2% from the 358 sold in April 2021. Year-to-date, passenger vehicle sales rose to 1,841, an increase of 23.6% than during the same period last year. On a rolling 12-month basis, passenger vehicle sales rose to 4,836, 29.2% higher than over the same period in 2021.

New commercial vehicle sales displayed a similar trend, declining month-on-month, but are up from the same month last year. 439 new commercial vehicles were sold in April, representing a month-on-month contraction of 16.4%, but a year-on-year increase of 10.6% y/y. 392 Light commercial vehicles, 17 medium commercial vehicles, and 30 heavy and extra heavy commercial vehicles were sold during the month. Light- and heavy commercial vehicle sales fell by 16.1% m/m and 30.2% m/m, respectively, while medium commercial vehicle sales rose by 13.3% m/m. On a twelve-month cumulative basis, light commercial vehicle sales are down 2.0% y/y, while medium commercial vehicle sales rose by 6.7% y/y, and heavy commercial vehicles climbed by 21.1% y/y.

Toyota continues to lead the new passenger vehicle sales segment with 36.8% of the segment sales year-to-date, followed by Volkswagen with 20.4% of the market share. The two top brands maintained their large gap over the rest of the market with Kia and Suzuki following with 7.9% and 6.1% of the market, respectively, leaving the remaining 28.8% of the market to other brands.

On a year-to-date basis, Toyota maintained its dominance in the light commercial vehicle space with a 60.6% market share, followed by Nissan with 10.7% of the market. Hino leads the medium commercial vehicle segment with 37.7% of sales year-to-date. Scania remained number one in the heavy and extra-heavy commercial vehicle segment with 27.3% of the market share year-to-date. 

The Bottom Line  

We noted in last month’s report that March new vehicle sales generally have a seasonal effect of being slightly higher than the surrounding months, and that we expect to see April’s new vehicle sales to return to the levels witnessed in the last 18 months. This has now transpired with new vehicle sales being 14.1% lower than last month. New vehicle sales were however 19.9% higher than during the same month a year ago and 13.5% higher than the average monthly sales figure over the past twelve months. On a 12-month cumulative basis, new passenger vehicle sales continued to increase, rising for the 17th consecutive month. New commercial vehicle sales however continue to hover around the 4,800 level where it has been trending for the past year.

PSCE – March 2022

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Private sector credit (PSCE) rose by N$1.35 billion or 1.2% m/m in March, bringing the cumulative credit outstanding to N$114.4 billion. On a year-on-years basis, private sector credit grew by 8.7% y/y, compared to the 7.1% y/y growth recorded in February. The growth was however again largely driven by a substantial increase in claims on non-resident private sectors. Normalising for this sees March PSCE growth at -0.9% m/m and 1.7% y/y. On a 12-month cumulative basis N$9.17 billion worth of credit was extended to the private sector. N$1.40 billion worth of credit has been extended to individuals on a 12-month cumulative basis, while corporates took up N$835 million. The non-resident private sector increased their borrowings by N$6.94 billion.

Credit Extension to Individuals

Credit extended to individuals fell by 0.2% m/m, but rose 2.3% y/y in March. On a monthly basis, only the instalment credit subcategory posted growth, increasing marginally by 0.2% m/m and 1.5% y/y. Mortgage loans to individuals contracted by 0.2% m/m but rose 2.2% y/y, while overdraft facilities fell by 1.3% m/m and 1.0% y/y. Other loans and advances (consisting of credit card debt, personal- and term loans) declined by 0.2% m/m, but rose 4.0% y/y.

Credit Extension to Corporates

Credit demand by corporates remained subdued, with credit extended to corporates declining by 1.8% m/m. On a year-on-year basis, credit extended to corporates slowed to 1.9% y/y. Mortgage loans increased by 1.3% m/m and 6.6% y/y. Instalment credit by corporates rose by 2.0% m/m and 11.2% y/y, although the growth rate is from a low base. Overdraft facilities to corporates continued to fall, declining by 4.3% m/m, although still posted a year-on-year growth of 1.3% y/y. The Bank of Namibia (BoN) ascribed the monthly decline to repayments by businesses operating in the energy, fishing and health services sectors.

Banking Sector Liquidity

The overall liquidity position of the commercial banks deteriorated during March, falling by N$104.5 million to an average of N$2.57 billion. The BoN noted that the rise is customary during March as government offices winds up expenditure before the close of the fiscal year, coupled with an increase of some investment proceeds. The repo balance rose to N$936.8 million at the end of the month after ending February at N$862.6 million.

Reserves and Money Supply

As per the BoN’s latest money statistics release, broad money supply (M2) N$1.73 billion or 1.4% y/y to N$129.1 billion. Foreign reserve balances fell by 5.3% m/m or N$2.27 billion to N$40.8 billion. The decline was ascribed to foreign government payments coupled with net commercial bank outflows due to an increase in the import bill.

Outlook

While PSCE growth appeared strong again in March, the increase was again primarily driven by a large increase in claims on non-resident private sectors. The BoN had previously attributed these substantial increases to a loan uptake by one of the commercial banks from its parent company in South Africa. Normalising for this large increase sees PSCE remaining subdued at 1.7% y/y in March, down from a normalised increase of 2.6% y/y in February.

Corporate credit demand remains particularly low, with only two of the last six months recording increases on a month-on-month basis. A lack of corporate credit appetite indicates low business confidence and that businesses are not taking up credit to expand their operations.

As expected, the BoN hiked the repo rate by 25bps at its April MPC meeting. Our expectation remains that we will see 3-4 additional 25 bp hikes throughout the rest of the year.