Category Archives: Economic Research

Economic Research

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.

Building Plans – March 2022

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A total of 198 building plans were approved by the City of Windhoek in March, representing a 9.6% m/m decrease from the 219 building plans approved in February. The total value of approvals fell by 18.1% m/m to N$128.0 million. The year-to-date value of approved building plans reached N$413.0 million, 1.7% higher than in the first quarter of 2021. On a twelve-month cumulative basis, 2,473 building plans with a value of N$1.97 billion have been approved, an increase of 4.9% y/y in number and 15.7% y/y in value terms. The number of completions for the month of March stood at 116, valued at N$74.1 million.

Additions to properties, the largest portion of approvals in both number and value terms, made up 133 of the total 198 approved building plans recorded in March, one more than registered in February. In the first quarter of the year, 364 additions to properties have been approved with a value of N$208.5 million, a 5.5% y/y increase in number and 29.9% y/y value terms. 58 additions worth N$14.5 million were completed in March.

New residential units were the second largest contributor to the total number and value of building plans approved with 63 new units worth N$41.8 million being registered, representing a 51.9% y/y decrease from the N$86.9 million worth of approvals in March 2021. On a 12-month cumulative basis, the number of residential units approved increased by 4.9% y/y to 842. While the number of new residential building plans approved during the first quarter were two more than during the same period last year, the value of these approvals fell by 28.3% y/y. 56 new residential units worth N$51.9 million were completed during the month.

2 New commercial and industrial units, valued at N$30 million were approved in March. This is 2 units fewer than approved in February, but an increase of 823.1% m/m and 328.6% y/y in value terms, although the increases are from a very low base. The increase in value is due to a N$25 million building plan submitted by Vivo Energy Namibia. Year-to-date, there have been 9 commercial and industrial building approvals valued at N$38.8 million. On a rolling 12-month perspective, the number of commercial and industrial building approvals has increased to 38 units worth N$195.7 million as at March, compared to the 25 approved units worth N$98.7 million over the corresponding period a year ago. Two commercial and industrial units worth N$7.6 million were completed in March.

The 12-month cumulative number of building plans approved increased by 4.9% y/y in March. A total of 2,473 building plans to the value of N$1.97 billion were approved over the last 12 months which represents an increase in value terms of 15.7% y/y. Additions to properties continue to make up the majority of the cumulative approvals at 64.4% in number terms. The number of commercial and industrial approvals has continuously remained in the single-digit territory since March 2020, indicating a lack of investment from businesses. The first quarter of the year saw total approvals generally in line with those of Q1 last year, recording an increase of only 3.9% y/y in number and 1.7% y/y in value terms. Completed building plans decreased by 27.7% y/y in value terms to N$1.06 billion on a 12-month cumulative basis.

NCPI March 2022

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Namibian’s annual inflation rate remained steady at 4.5% in March. Prices in the overall NCPI basket increased by 0.6% m/m. On a year-on-year basis, overall prices in four of the twelve basket categories rose at a quicker rate in March than in February, with five categories recording slower rates of inflation and three categories recorded consistent with the prior month. Prices for goods increased by 5.7% y/y while prices for services increased by 2.9% y/y in March.

Transport was rather unsurprisingly the largest contributor to the annual inflation rate in March, contributing 1.9 percentage points to the total 4.5% y/y inflation rate. Overall prices in this basket item increased by 2.6% m/m and 13.8% y/y. All three sub-categories in this basket item recorded higher inflation on a year-on-year basis. The operation of personal transport equipment sub-category recorded the largest increase in prices of 4.1% m/m and 19.2% y/y, following the Ministry of Mines and Energy’s decision to increase petrol and diesel prices by 120- and 130 cents per litre, respectively, in March. Price of public transportation services rose by 9.8% y/y, marginally quicker than the 9.6% recorded in February, while the purchase of vehicles sub-category recorded inflation of 4.0 % y/y . We expect transport inflation to remain high over the medium term, as global oil supply remains tight amid the Ukraine crisis. 

Food & non-alcoholic beverages, the second largest basket item by weighting, contributed 0.9 percentage points to the annual inflation rate in March. Overall, prices in this basket item rose by 0.4% m/m and 4.6% y/y. 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 15.6% y/y, followed by the prices of fruits, which increased by 10.0% y/y, and  the ‘food’ sub-category which increased by 4.7% y/y. 

Prices in the alcohol and tobacco category, the third largest basket item by weighting, increased 4.1% y/y in March. On a monthly basis, prices in the basket item increased by 0.4%, following a 0.8% m/m decrease in February. The prices of alcoholic beverages increased 0.3% m/m and 4.1% y/y while tobacco prices rose by 0.7% m/m and 4.1% y/y.

Namibia’s annual inflation remains above its 12-month average of 4%. While March’s annual inflation rate of 4.5% remained unchanged from last month, the risk of rising inflation is high given the upward pressure expected on fuel and food prices, coupled with the fact that it is unlikely that interest rate hikes by the Bank of Namibia will significantly dampen these inflationary pressures in the near term. Transport and food remain the primary drivers of Namibian’s inflation, contributing 62% to country’s annual inflation rate in March. IJG’s inflation model currently forecasts inflation to average between 4.4% and 5.1% in 2022 with the upper end of the range more likely to materialise.