Category Archives: Economic Research

Economic Research

New Vehicle Sales – September 2021

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767 new vehicles were sold in September, a near identical number to the 762 sold in August. This brings the total number of new vehicle sales in 2021 to 7,221. On a year-on-year basis, new vehicle sales declined by 12.2%. On a 12-month cumulative basis, vehicle sales have grown by 11.8% to 9,186. September is usually a better month for new vehicle purchases. In fact, 767 represents the smallest number of new cars sold in the month of September over the past decade, lower even than 2020’s September figure. As such, 2021 remains on track to be the second worst year for car sales in the past decade.

380 new passenger vehicles were sold in September, a 12.4% increase from the 338 sold in August and a 36.7% increase from this time last year. Year-to-date, the sale of new passenger vehicles increased by 51.2% y/y. On a 12-month cumulative basis, sales have increased by 33.6% y/y to 4,356. There is a distinct upward trend in the 12-month cumulative sales figures as it starts to shed the historically low sales numbers from 2020. If this modest upward trend continues there is a good chance that we will see 12-month cumulative sales figure reach late 2019 values by the end of 2021.

Total commercial vehicle sales fell by 8.7% m/m and 35.1% y/y in September. The biggest decline came in the light commercial vehicles category with sales falling by 14.1% m/m and 43.4% y/y to 304, the lowest monthly sales figure for the year. 16 medium commercial vehicles were sold in September, a 6.7% y/y increase but identical to the previous month’s figure. Lastly, 67 heavy commercial vehicles were sold, a 24.1% m/m increase and 52.3% y/y increase. On a 12-month cumulative basis, light commercial vehicle sales decrease by 5.7% y/y and medium commercial vehicle sales decreased by 10.6% y/y, while heavy commercial vehicle sales increased by 37.4% y/y.    

Volkswagen and Toyota continue to dominate the market for passenger vehicles, with each maintaining about a 30% share of the market in 2021. Given the ingrained popularity of these two brands it is unlikely that another car maker will be able to displace them in the short- to medium-term. Kia, Hyundai and Suzuki have market shares of 9%, 6% and 5% respectively. 

On a year-to-date basis, Toyota is the biggest seller of light commercial vehicles. They have a 54% share of the market so far in 2021. Mercedes is the main player in the medium commercial vehicles market with a market share of 32%. The German carmaker also has a 14% market share in the heavy and extra heavy commercial vehicle market. Scania has the largest market share in the heavy and extra-heavy commercial vehicle market with 24%.  

The Bottom Line  

In the context of 2021 September was an average month for vehicle sales in Namibia. The sale of passenger vehicles increased month-on-month and sales of commercial vehicles decreased, all but balancing each other out. While new vehicle sales remain generally sluggish, Namibia’s situation is not unique. Car sales are down in Europe and the US as the global shortage of semiconductors rolls on. However, Namibia’s declines are best explained by consumers not being able to afford new vehicles and corporates not replacing their fleets.

NCPI September 2021

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The Namibian annual inflation rate rose to 3.5% y/y in September after it had slowed to 3.4% in August. Prices in the overall NCPI basket rose by 0.3% m/m. On a year-on-year basis, overall prices in five of the twelve categories rose at a quicker rate in September than August, five categories experienced slower rates of inflation and two categories posted steady inflation. Prices for services rose by 1.7% y/y while prices for goods rose by 4.8% y/y.

Transport, the third largest basket item by weighting, was the largest contributor to annual inflation, contributing 1.0 percentage point to the total 3.5% y/y inflation rate. Prices in this category increased by 1.5% m/m and by 7.5% y/y in September. Prices in two of the three sub-categories recorded increases on an annual basis. Vehicle prices increased by 10.4% y/y and prices in the sub-category “operation of personal transport equipment” increased by 11.6% y/y. The price of public transport services decreased by 8.3% y/y. Due to base effects, we are likely to see another year-on-year increase in this sub-category in October, which will put further upward pressure on the transport inflation print.

The increases in transport costs can be attributed partly to increases in the price of oil. A lack of investment in the supply of oil (constructing new oil rigs and refineries), coupled with a sustained increase in global demand for energy means that prices for oil are expected to remain high in the short to medium-term. In summary, rising transport costs, driven by sustained increases in the price of oil, are likely to continue exerting upward pressure on the inflation figure as we are likely to see second round effects should transport prices remain elevated.  

Food & non-alcoholic beverages was the second biggest contributor to the annual inflation rate in September, contributing 0.9 percentage points. Prices in this basket category increased by 0.1% m/m and 5.0% y/y. All sub-categories registered price increases on an annual basis. The largest increases were observed in the oils and fats subcategory, which increased by 17.7% y/y, and meat prices, which rose by 12.1% y/y. On a monthly basis, twelve of the thirteen sub-categories saw price increases while only the price of vegetables decreased, by 2.3% m/m.  

The third largest contributor to the annual inflation rate in September was the alcohol & tobacco basket item, recording inflation of 0.5% m/m and 3.0% y/y. The prices of alcoholic beverages increased by 0.3% m/m and 1.8% y/y while the price of tobacco products increased by 1.1% m/m and 8.6 % y/y.

The 3.5% y/y annual inflation rate is in line with IJG’s average inflation forecast for the year. IJG’s inflation model predicted that annual inflation rate would be 3.4% y/y in September. Inflation risks remain to the upside. Elevated global shipping costs and the ongoing shortage of microchips and semiconductors pose a threat to production in a variety of industries. IJG’s inflation currently predicts that annual inflation will rise to 3.6% y/y in November and 3.8% y/y in December 2021. Average annual inflation for 2022 is forecast at 3.6% y/y. Given current data, the estimated upper bound for annual inflation in Namibia in 2022 is 4.7% y/y. The current uncertainty in the global economy makes this is a highly tentative prediction. 

PSCE – August 2021

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Overall

Private sector credit (PSCE) decreased by N$94.3 million or 0.09% m/m in August. On a year-on-year basis, PSCE grew by 1.85% y/y in August, down from July’s increase of 2.72% y/y. On a month-on-month basis, financial corporations, individuals and the non-resident private sector all increased their borrowings. Corporates, on the other hand, decreased their borrowings by N$519.1 million or 1.20% m/m. Cumulative credit extended to the private sector over the last 12-months amounted to N$1.91 billion, down 17.0% from the N$2.23 billion issued by this time last year. Individuals have taken up the majority of this cumulative issuance. 

Credit Extension to Individuals

Credit extended to individuals increased by 0.66% m/m and 4.40% y/y in August. This is the largest year-on-year increase in 2021. This increase was driven strong growth mortgage loan growth of 4.6% y/y and 4.4% y/y growth in other loans & advances (credit card debt, personal- and term loans). Overdrafts grew by 9.1% y/y in August. All subcategories of loans and advances posted growth on a monthly basis with other loans and advances posting growth of 2.1% m/m, mortgage loans increasing by 0.4% m/m and overdrafts climbing by 0.2% m/m.

Credit Extension to Corporates

Credit extended to corporates contracted by 1.20% m/m and 1.23% y/y in August, as businesses continued to delever their balance sheets. This is the first year-on-year decrease in corporate credit extensions in 2021. The decline is largely due to overdrafts to corporates decreasing by 5.1% m/m and 3.1% y/y. Other loans & advances shrunk by 1.7% m/m and 1.0% y/y. Instalment credit grew marginally by 1.5% m/m but contracted by 2.6% y/y, the 19th consecutive month of contraction on an annual basis. Corporate mortgages increased by 2.1% m/m and 0.4% y/y.

Banking Sector Liquidity

The overall liquidity position of Namibia’s commercial banks increased significantly in August, rising by roughly N$1.24 billion to an average of N$1.80 billion in August. As a result of the improved liquidity, the balance of repo’s outstanding decreased. The repo balance at the start of August was N$1.02 billion, by the end of the month it stood at N$734.6 million.

Reserves and Money Supply

Broad Money Supply contracted by N$1.38 billion or 1.1% y/y in August, according to the BoN’s latest monetary statistics. The money supply did however increase month-on-month and now stands at N$123.1 billion compared to N$121.5 billion at the end of July. The BoN’s stock of international reserves decreased by 4.1% m/m to N$40.9 at the end of August. The central bank attributes this decrease to both increased government payments and commercial bank purchases of foreign currency for import payments in August.

Outlook

Overall, PSCE growth remained subdued and in line with what has been seen so far in 2021. As stated, rolling 12-month issuance is down 17.0% y/y to N$1.91 billion, but more tellingly that same figure is down 67.1% compared to August 2019.  

Even if, interest rates remain steady for the remainder of 2021, as expected, this is unlikely to meaningfully increase the growth rate of PSCE. Despite growth in the economy in Q2 2021, consumers are likely to remain cautious and prioritise saving over consumption. The data bears this out as year-on-year increases in credit extensions to individuals in 2021 are similar to those seen in 2020. Meaningful PSCE growth is therefore likely to return only once macroeconomic conditions improve meaningfully and both consumers and businesses can spend more freely.