Category Archives: Economic Research

Economic Research

NCPI February 2022

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Namibian’s annual inflation rate slowed marginally to 4.5% y/y in February, following the 4.6% y/y increase in prices recorded in January. Prices in the overall NCPI basket increased by 0.2% m/m. On a year-on-year basis, overall prices in two of the twelve basket categories rose at a quicker rate in February than in January, eight recorded slower rates of inflation and two remained steady. Prices for goods increased by 5.5% y/y and prices for services increased by 3.0% y/y.

Transport was the largest contributor to the annual inflation rate in February, with prices in this category increasing by 1.0% m/m and 13.2% y/y. This basket item contributed 1.8 percentage points to the annual inflation rate in February. Prices in all three sub-categories recorded price increases on a year-on-year basis. The operation of personal transport equipment recorded the largest increase in prices of 1.7% m/m and 18.5% y/y. This was largely due to fuel prices being up 33.3% y/y in February.  The purchase of vehicles sub-category recorded slower inflation at 3.7% y/y while the prices of public transportation services rose by 9.6% y/y.

Food & non-alcoholic beverages, the second largest basket item by weighting, contributed 1.0 percentage point to the annual inflation rate in February. Prices in this basket item rose by 1.0% m/m and 5.4% y/y. All thirteen sub-categories recorded price increases on an annual basis. The biggest increases were recorded in the prices of oils and fats which rose by 13.5% y/y, followed by the prices of fruits, which increased by 12.6% y/y, and meat which increased by 7.2% y/y.

Alcohol and tobacco inflation slowed to 3.5% y/y in February from the 3.9% y/y increase recorded in January. On a monthly basis, prices in the basket item decreased by 0.8%. The alcoholic beverages sub-category recorded a price decrease of 0.6% m/m and up 3.4% y/y. Tobacco prices were down 2.0% m/m but rose 3.8% y/y.

February’s inflation print of 4.5% is the first month of (marginally) slower price increases following five consecutive months of rising inflation. Transport and food costs continue to be the main drivers of Namibian inflation, with the two categories contributing 62% to February’s annual rate.. IJG’s inflation model currently forecasts inflation to average between 3.4% and 5.0% in 2022, although the upper end of the range seems more likely at this stage as risks remain tilted to the upside.

New Vehicle Sales – February 2022

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A total of 883 new vehicles were sold in February, which is 178 more than were sold in January but represents a 1.1% y/y decrease from the 893 vehicles sold in February 2021. During the first two months 1,588 new vehicles have been sold, of which 843 were passenger vehicles, 632 light commercial vehicles, and 113 medium and heavy commercial vehicles. By comparison, the first two months of 2021 saw 1,586 new vehicles sold. 2022 is thus off to a similar start compared to last year. On a 12-month cumulative basis, new vehicle sales have grown by 22.0% y/y to 9,430.

439 new passenger vehicles were sold during February, an increase of 8.7% m/m from the 404 sold in January, and an increase of 6.8% y/y from the 411 vehicles sold in February 2021. On a 12-month cumulative basis, new passenger vehicle sales have increased by 36.5% y/y to 4,562. Encouragingly, on a year-to-date basis, new passenger vehicle sales for February have exceeded 2020 and 2021 levels, with the 843 sold so far this year, 78 more than in 2021 and 209 higher than over the same period in 2020.

444 commercial vehicles were sold in February, a 47.5% m/m increase but 7.9% y/y decrease. While all three sub-categories recorded better sales than last month, the monthly increase was primarily driven by a strong increase in light commercial vehicle sales of 37.6% m/m following the relatively sharp decline in January. Medium commercial vehicle sales rose by 23.1% y/y while heavy commercial vehicle sales fell by 7.5% y/y.  On a twelve-month cumulative basis, light commercial vehicle sales have increased by 6.6% y/y, medium commercial vehicles rose by 27.0% y/y, and heavy commercial vehicles recorded an increase of 46.7% y/y.

Toyota enjoys a strong lead in the passenger vehicle sales segment with a with a 40.3% of the segment sales year-to-date, followed by Volkswagen with 16.6% of the market share.  Both manufacturers have started the year off on a strong foot that will make it difficult for other manufacturers to catch up. They were followed by Kia and Suzuki with 8.1% and 5.6% of the market, respectively, leaving the remaining 29.4% of the market to other brands.

On a year-to-date basis, Toyota remained the leader in the light commercial vehicle space with a 57.8% market share. Nissan came in second place claiming a market share of 9.9%. Hino claimed 42.9% of the market for medium commercial vehicles, followed by Toyota with a market share of 19.0%. There appears to be relatively stronger competition in the heavy and extra-heavy commercial vehicle space as Scania, Volvo Trucks and MAN achieved market shares of 30%, 17% and 12% respectively.

The Bottom Line  

February’s new vehicle sales figure of 883 was the highest number since March 2021, when 919 new vehicles were sold. On a 12-month cumulative basis, new passenger vehicle sales have encouragingly increased 15 consecutive months, possibly reflecting a minor uptick in consumer confidence. As mentioned last month, the strong increase in commercial vehicle sales is positive news, as it indicates that a few companies and mines are starting to upgrade their fleets. This indicates improving business optimism. While we estimate new vehicle sales to be marginally higher than the previous two years as the economy starts recovering, we do not expect to see a major uptick in sales the short-term. The recently tabled 2022/23 national budget also indicated that the government will not be a major buyer of new vehicles in the coming financial year.

PSCE – January 2022

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Overall

Private sector credit (PSCE) increased by N$4.22 billion or 4.0% m/m in January, the largest month-on-month percentage increased since 2003, bringing the cumulative credit outstanding to N$110.6 billion. On a year-on-year basis, private sector credit grew by 4.8% y/y in January, substantially quicker than the 1.0% growth recorded in December. Cumulative credit extended to the private sector over the last 12 months amounted to N$5.04 billion. N$1.9 billion worth of credit has been extended to individuals on a 12-month cumulative basis, while N$917.9 million was extended to corporates. Claims on non-resident private sectors increased by an immense N$2.4 billion during the month, which drove most of the increase in the overall PSCE figure.

Credit Extension to Individuals

Credit extended to individuals increased by 0.4% m/m and 3.2% y/y in January. Most of the increase was driven by an increase in mortgage loans of 0.3% m/m and 3.4% y/y. Overdraft facilities to individuals also displayed relatively strong growth of 3.7% m/m and 2.0% y/y during the month. Other loans and advances (consisting of credit card debt, personal- and term loans) rose by 0.4% m/m and 4.0% y/y.

Credit Extension to Corporates

Credit extended to corporates grew by 2.1% y/y in January, following a contraction of 0.1% y/y in December. On a month-on-month basis credit extension to corporates rose 3.5% in January. The month-on-month growth was primarily driven by increased uptake in overdraft facilities which registered growth of 16.1% m/m, but fell 2.7% y/y. Demand for instalment credit by corporates remain low, falling by 0.4% m/m, but increasing 3.6% y/y. Mortgage loans to corporates fell by 1.6% m/m, but rose 1.4% y/y.

Banking Sector Liquidity

The overall liquidity position of the commercial banks deteriorated significantly during January, falling by N$2.00 billion to an average of N$2.85 billion. The BoN ascribed the decline to corporate tax payments at the start of 2022. The decline meant that the repo balance increased from zero at the end of December to N$1.53 billion at the end of the month.

Reserves and Money Supply

Broad money supply (M2) rose by N$2.03 billion or 1.6% y/y to N$128.4 billion, according to the BoN’s latest monetary statistics. Foreign reserve balances fell by 1.3% m/m or N$576.8 million to a total of N$43.3 billion. The contraction was contributed to increased government payments, increased commercial bank purchases of foreign currencies as well as exchange rate revaluations during the period.

Outlook

PSCE started the year off strong with a 4.0% m/m increase. It should however be noted that a significant portion of the increase has been driven by an increased uptake of overdraft facilities, particularly by corporates. Overdraft facilities are typically used to address short-term funding requirements, and not to fund long-term capital investment projects. The N$2.4 billion increase in claims on non-resident private sectors is however encouraging.

As expected, the BoN decided to raise rates by 25 basis points at its February MPC meeting. Inflationary pressure is expected to pick up in the coming months due to the rising oil price and the second-round effects. We continue to forecast both the South African and Namibian central banks to increase rates between 75- and 125-basis points during the year.