Category Archives: Economic Research

Economic Research

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.

NCPI July 2022

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The Namibian annual inflation rate rose to 6.8% y/y in July, the quickest pace since March 2017. On a month-on-month basis, inflation remained steady at 1.0% m/m. Year-on-year, overall prices in eight of the twelve basket categories rose at a quicker rate in July than in June, two categories experienced slower rates of inflation and two categories posted steady inflation. Prices for goods increased by 10.0% y/y, the fastest since February 2009, while prices for services rose by 2.5% y/y.

Transport, the third largest basket item by weighting, was the largest contributor to annual inflation, contributing 3.0 percentage point to the total 6.8% y/y inflation rate. Prices in this category increased by 3.0% m/m and by 20.9% y/y in July, the largest year-on-year increase on our records dating back to 2003. All three sub-categories in this basket recorded increases on a month-on-month basis. Operation of personal transport equipment recorded the largest increase in prices of 4.4% m/m and 35.5% y/y, attributable to the N$1.88 and N$1.34 per litre increase in petrol and diesel prices, respectively, at the start of July. Year-to-date, petrol and diesel prices are up 42.4% and 46.1% respectively. The purchase of vehicles sub-category recorded inflation of 0.9% m/m and 5.2% y/y. Prices of public transportation services rose 0.1% m/m, but fell 4.1% y/y.

Food & non-alcoholic beverages was the second largest contributor to the annual inflation rate in July, contributing 1.5 percentage points. Prices in this basket item rose 0.8% m/m and 8.4% y/y, the quickest year-on-year increase since February 2017. All sub-categories registered price increases on an annual basis. The largest increases were observed in the oils and fats sub-category, which increased by 26.5% y/y and fruits, which rose by 24.5% y/y. On a monthly basis, twelve of the thirteen sub-categories saw price increases with only the meat sub-category recording a price decrease of 1.1% m/m.

The third largest contributor to the annual inflation rate in July was the alcohol & tobacco basket item, recording inflation of 0.4% m/m and 5.4% y/y. The prices of alcoholic beverages increased by 0.4% m/m and 5.4% y/y while the price of tobacco products increased by 0.6% m/m and 5.4% y/y.

Namibia’s annual inflation rate has consistently been trending higher since August last year, and as mentioned earlier in the report, July’s print is the quickest since March 2017. While the rate is high, it is by no means extraordinary for Namibia, as it has reached (and breached) this level a couple of times over the past two decades. Rising transport and food prices continue to be the main drivers for Namibia’s inflation rate, with the two categories contributing 67% to the annual inflation rate in July. Higher transport costs should continue to filter through to other categories of goods and services via second round effects, but runaway domestic inflation is unlikely. A similarly high inflation rate in South Africa has prompted the South African Reserve Bank (SARB) to pick up the pace of tightening monetary policy, with the 75 bp rate hike in July coming in higher than most forecasts. The SARB appears to be front-loading rate increases, opting to stay ahead of central banks in developed markets, and reinforcing its commitment to anchoring inflation expectations and to preserve its credibility. We expect the Bank of Namibia’s MPC to respond in-kind at their August meeting. IJG’s inflation model currently forecasts the annual Namibian inflation rate to continue ticking higher over the next couple of months, and to average between 5.9% and 6.5% in 2022, before gradually moderating to an average of 5.6% in 2023.

PSCE – June 2022

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Overall

Private sector credit extension (PSCE) declined by N$710.4 million or 0.6% m/m in June, the first month-on-month decline this year, bringing the cumulative credit outstanding to N$115.9 billion. On a year-on-year basis, PSCE grew by 9.9% y/y in June, compared to the 11.0% y/y growth recorded in May. The growth figure slowed from 3.9% to 2.8% y/y in June when adjusted for the large increases in claims on non-resident private sectors observed between January and March this year. On a 12-month cumulative basis N$10.4 billion worth of credit was extended to the private sector. Of this cumulative issuance, individuals took up N$1.21 billion, corporates increased their borrowings by N$2.32 billion and the non-resident private sectors took up N$6.92 billion.

Credit Extension to Individuals

Credit extended to individuals contracted by 0.2% m/m while year-on-year growth slowed to 2.0% y/y in June compared to the 2.4% y/y increase recorded in May. The decline in credit extended to individuals is primarily due to weaker demand for mortgage and overdraft credit by households during June. Mortgage loans to individuals contracted by 0.5% m/m but increased 1.5% y/y. This is the lowest year-on-year growth in mortgage loans observed since June 2019. Mortgage loan growth has been slowing since July 2020 on an annual basis, possibly indicating that the willingness of commercial banks to extend credit to individuals to buy, renovate or build new houses since the pandemic remains low. Overdraft facilities to individuals contracted by 2.1% m/m and 3.0% y/y. Other loans and advances (consisting of credit card debt, personal- and term loans) rose by 1.5% m/m and 5.8% y/y, continuing a steady rise since April 2021.

Credit Extension to Corporates

Credit extended to corporates grew by 5.3% y/y in June, slowing from the 7.4% y/y increase recorded in May. On a month-on-month basis, credit extension to corporates fell by 1.3% m/m. According to the Bank of Namibia (BoN), the decline in credit extended to corporates is mainly due to weaker demand for short-term credit facilities, specifically in the energy, mining, and commercial services sectors. Overdraft facilities to corporates contracted by 4.4% m/m and 9.4% y/y, the 8th consecutive contraction on a year-on-year basis. Other loans and advances to corporates contracted by 3.1% m/m but increased 14.1% y/y, albeit from a low base. Instalment credit by corporates rose by 4.6% m/m and 18.1% y/y. While the year-on-year growth in instalment credit was achieved from a low base, the month-on-month increase was the largest since June 2019, with the amount outstanding starting to reach pre-pandemic levels. Mortgage loans to corporates rose by 1.2% m/m and 3.6% y/y.

Banking Sector Liquidity

The overall liquidity position of the commercial banks continues to rise. Commercial banks’ liquidity increased by N$1.31 billion to an average of N$5.10 billion in June. According to the BoN, the rise in the market cash position is partly attributable to an increase in diamond sales proceeds and investment liquidations by asset managers in preparation for tax payments. The repo balance rose marginally to N$488.0 million at the end of the month, after ending at N$438.9 million in May.

Reserves and Money Supply

Broad money supply (M2) rose by N$829.5 million or 5.4% y/y to N$128.4 billion, according to the BoN’s latest monetary statistics. The BoN ascribed the increase in M2 growth to a rise in net claims on central government by the depository corporations, as commercial banks increased their holdings of government securities. Foreign reserve balances rose by 4.7% m/m or N$2.07 billion to a total of N$46.0 billion. The BoN ascribed the rise in the foreign reserve stock to increased commercial bank foreign currency inflows and Rand seigniorage payments.

Outlook

While PSCE grew by 9.9% y/y in June, above the average for the year to date, it should be noted that it has been achieved from the unusually large increase in credit extensions to non-residents observed earlier this year. When the growth figure is normalised as noted above, year-on-year PSCE growth slows to a mere 2.8% and remains subdued when compared to pre-pandemic levels. Overall, credit uptake by both individuals and businesses remains relatively muted partly due to a lack in their ability to take up credit under the prevailing inflationary and monetary tightening environment. We expect PSCE growth to remain low while the BoN continues its monetary tightening stance in line with other central banks around the world. The BoN’s MPC is expected to raise the repo rate by 75 basis points at its next MPC meeting scheduled for 17 August 2022 in line with the rate hike by the SARB at its last MPC meeting held in July.