Category Archives: Economic Research

Economic Research

NCPI May 2022

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The Namibian inflation rate slowed to 5.4% y/y in May from 5.6% y/y in April. Prices in the overall NCPI basket rose by 0.1 % m/m, slower than the 1.4% m/m increase recorded in April. On a year-on-year basis, overall prices in four of the twelve basket categories rose at a faster rate in May than in April, with five categories recording slower rates of inflation and three categories recording prices consistent with April. Prices for goods increased by 7.1% y/y while prices for services increased by 3.1% y/y in May.

Transport continues to be the largest contributor to the annual inflation rate, contributing 2.4 percentage points to the total 5.4% y/y inflation rate in May. Overall, prices in the transport category declined by 1.2% m/m, but rose 16.7% y/y. The three sub-categories in the transport basket item all recorded slower inflation on both a monthly and annual basis in May, except for the public transport services category which recorded steady inflation on an annual basis. The slower inflation follows the Ministry of Mines and Energy’s decision at the beginning of May to temporarily reduce the levies imposed on fuel products for a period of three months and to decrease the petrol price by 120 cents per litre and the diesel price by 30 cents per litre in May. According to the Namibian Statistics Agency (NSA) data, prices of public transport services rose by 9.8% y/y in May, unchanged from April. Prices of operating personal transport equipment declined by 2.1% m/m but rose by 24.4% y/y, while the prices of purchasing vehicles rose 0.5% m/m and 3.5% y/y in May. The Ministry of Mines and Energy’s decision to increase fuel prices again in June negates the fuel levy relief granted and will result in even higher fuel prices in August should the reduction in fuel levies not be extended beyond July.

The food & non-alcoholic beverages basket item was the second biggest contributor to the annual inflation rate in May, contributing 1.2 percentage points. Prices in this basket item rose by 1.5% m/m and 6.6% y/y in May. All thirteen sub-categories in this basket recorded price increases on an annual basis, as has been the case since January this year. The largest increase was again recorded in the prices of oils and fats which rose by 27.4% y/y, followed by fruit, which saw price increases of 16.5% y/y. The prices of bread and cereals rose by 7.6% y/y, milk, cheese, and eggs by 5.4% y/y, vegetables by 3.9% y/y, and meat by 3.4% y/y in May.

The alcohol & tobacco basket item, the third-largest contributor to the annual inflation rate, recorded higher inflation at 4.7% y/y in May, compared to the 4.5% y/y observed in April. On a monthly basis, prices in the basket item remained steady. The prices of tobacco products rose by 0.1% m/m and 6.3% y/y, while the prices of alcoholic beverages declined by 0.1% m/m but rose 4.3% y/y in May.

Namibia’s annual inflation rate of 5.4% in May was slightly slower than the rate recorded last month and was mainly the result of relatively lower fuel costs in May. The Inflation rate for petrol and diesel slowed from 47.7% y/y in April to 42% y/y in May. Despite this decline, rising food and transport prices remain the primary drivers of the Namibian inflation rate, with the two categories alone contributing over two-thirds to the country’s annual rate in May. The persistent inflationary pressures, and the SARB’s MPC decision to hike rates in May, necessitated the Bank of Namibia’s MPC to also raise interest rates by 50 basis points in June. The MPC noted in its announcement that it will continue to monitor developments in inflation to ensure price stability in the interest of the sustainable economic development of the country. IJG’s inflation model currently forecasts inflation to average between 5.0% and 6.2% in 2022.  

New Vehicle Sales – May 2022

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A total of 767 new vehicles were sold in May, down 15.25% m/m from the 905 vehicles sold in April 2022 and down 2.9% y/y from the 790 vehicles sold in May 2021. Year-to-date 4,317 new vehicles have been sold, of which 2,243 were passenger vehicles, 1,800 light commercial vehicles, and 272 medium and heavy commercial vehicles. In comparison, 4,050 new vehicles were sold during the first 5 months of 2021. On a twelve-month cumulative basis, a total of 9,695 new vehicles were sold at the end of May, representing a 9.0% y/y increase from the 8,912 new vehicles sold over the comparable period a year ago.

402 new passenger vehicles were sold in May, the lowest monthly sales figure so far this year, and down 13.7% from the 466 passenger vehicles sold in April, but up 12.3% when compared to the 358 sold in May 2021. Year-to-date, 2,243 new passenger vehicles have been sold, an increase of 21.4% from the 1,847 new passenger vehicles sold over the same period in 2021. On a twelve-month cumulative basis, a total of 4,880 new passenger vehicles were sold, up 26.0% y/y when compared the 3,872 passenger vehicles sold over the comparable period last year. Despite being a somewhat weaker month for new passenger vehicle sales, May’s sales figure is not far off the average monthly sales figure for the past 12 months.

365 new commercial vehicles were sold in May, down 16.9% m/m from the 439 commercial vehicles sold in April and down 15.9% y/y when compared to the 432 commercial vehicles sold in May 2021. Light commercial vehicle sales continue to make up the bulk of the new commercial vehicle sales with 309 sold in May, followed by 47 heavy and extra heavy commercial vehicles and 9 medium commercial vehicles sold during the month. Light- and medium commercial vehicle sales fell by 21.2% m/m and 47.1% m/m, respectively, while heavy and extra heavy commercial vehicle sales rose by 56.7% m/m. On a twelve-month cumulative basis, light commercial vehicle sales fell by 6.5% y/y, while medium commercial vehicle and heavy and extra heavy commercial vehicle sales rose by 0.5% y/y and 12.4% y/y, respectively.

Toyota retained its lead in the new passenger vehicle sales segment with 33.0% of the segment sales year-to-date, despite the significant decline in its monthly vehicles sales figure in May following the closure of its plant in KwaZulu-Natal due to flood damage. Volkswagen, with a 19.8% of the passenger vehicle market share, was second, followed by Kia and Suzuki with 8.8% and 7.8% of the market, respectively, leaving the remaining 30.6% of the market share to other brands.

On a year-to-date basis, Toyota maintained its dominance in the light commercial vehicle space with a 54.9% market share despite also recoding significantly lower sales in this segment, followed by Nissan with 12.1% of the market. Hino continues to lead the medium commercial vehicle segment with 33.9% of sales year-to-date. Scania retains its position as the leader in the heavy and extra-heavy commercial vehicle segment with 31.6% of the market share year-to-date, an increase from last month.

The Bottom Line  

12-month cumulative new passenger vehicle sales continue to increase, rising for the 18th consecutive month, while 12-month cumulative commercial vehicle sales continue to hover around the 4,800 level, where it has been for the last 14 months. While the month of May has historically been a relatively weaker month for new vehicle sales in Namibia, this year’s decline in May was to an extent driven by the closure of the Toyota plant in KwaZulu-Natal, as the manufacturer recorded an over 50% decline in sales in all segments when compared to its monthly average over the past 12 months. Overall year-to-date new vehicle sales are still roughly in line with those of 2021.

PSCE – April 2022

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Overall

Private sector credit (PSCE) increased by N$1.78 billion or 1.6% m/m in April, bringing the cumulative credit outstanding to N$116.2 billion. On a year-on-year basis, private credit sector credit grew by 10.5% y/y, compared to the 8.7% y/y growth recorded in March. While this was another relatively large monthly increase, this month’s increase was primarily driven by an increase in corporate credit demand versus the prior three months’ increases which were driven by increases in claims on non-resident private sectors. Normalising for the increases in claims on non-resident private sectors the past three months sees annual PSCE growth at 3.4% y/y. On a 12-month cumulative basis N$11.0 billion worth of credit was extended to the private sector. The non-resident private sector has taken up the bulk of this issuance with debts over the past 12 months summing to N$7.05 billion, while corporates have taken up N$2.58 billion and individuals have taken up N$1.37 billion. 

Credit Extension to Individuals

Credit extended to individuals increased by 0.5% m/m and 2.2% y/y in April. Mortgage loans to individuals rose by 0.6% m/m and 2.3% y/y. Overdraft facilities increased by 1.8% m/m, but contracted by 1.0% y/y. Other loans and advances (consisting of credit card debt, personal- and term loans) rose by 0.4% m/m and 4.1% y/y.

Credit Extension to Corporates

Credit extension to corporates grew by 3.1% m/m, following two months of declines. Growth in credit extension to corporates accelerated to 5.9% y/y in April, compared to 1.9% y/y growth registered in March. The increase was largely driven by a 6.4% m/m increase in ‘other loans and advances’. The Bank of Namibia (BoN) ascribed the increase to increased demand by corporates in the transport-, commercial property- and agricultural services sectors. Overdraft facilities to corporates rose by 1.9% m/m, but fell 4.4% y/y. Instalment credit by corporates fell by 0.6% m/m, although still recorded growth of 14.2% y/y.

Banking Sector Liquidity 

The overall liquidity position of the commercial banks fluctuated markedly in April, with the average position increasing by N$437.2 million to N$3.00 billion, while the daily position on the 29th was down N$1.21 billion from the N$3.70 billion recorded at the end of March. According to the BoN, the change was due to increased demand at the bond auctions held during the month. The repo balance rose to N$1.97 billion at the end of the month after ending March at N$936.8 million.

Reserves and Money Supply

The BoN’s latest figures show broad money supply (M2) increased by N$1.76 billion or 1.4% y/y to N$126.4 billion. The central bank’s stock of international reserves rose by 5.6% m/m or N$2.27 billion to N$43.0 billion. The BoN noted that the increase was due to SACU revenue inflows and the depreciation of the Namibian dollar.

Outlook

As mentioned earlier in the report, the relatively strong PSCE growth in April was largely driven by an increase in corporate credit demand, specifically in the ‘other loans and advances’ category. While an increase in corporate credit demand is generally positive, the specific category that drove this increase in April is made up of shorter term debt. Short-term debt is generally used to cover short-term cash needs, and not to expand operations, thus meaning that the increase in corporate demand in April is not necessarily an indication of investment in fixed capital, but may be into working capital.

On a 12-month cumulative basis, private sector credit issuance increased by a rather substantial 292.1% y/y to N$11.0 billion. 64.1% of this increase was however due to the large increases recorded in claims on non-resident private sectors in the first three months of the year, which the BoN previously attributed to a loan uptake by one of the commercial banks from its parent company in South Africa.