Category Archives: Economic Research

Economic Research

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.

Building Plans – January 2022

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A total of 176 building plans were approved by the City of Windhoek in January, representing a 79.6% m/m increase from the 98 building plans approved in December. In monetary terms, the approvals were valued at N$128.7 million. 2022 is off to a better start in both number and value terms compared to January 2021 when 122 building plans worth N$84.0 million got the nod. On a twelve-month cumulative basis, 2,505 building plans worth approximately N$2.01 billion were approved, an increase in number of 9.7% y/y and 14.9% y/y in value terms over the prior 12-month period.

In terms of both number and value, additions to properties made up the largest portion of approvals. For the month of January, 99 additions to properties were approved with a value of N$75.4 million, 28 more than the number of additions approved in January 2021. The value of approvals is however slightly skewed by a single large approval of N$21.1 million during the month. 40 Additions worth N$9.2 million were completed during the month.

New residential units were the second largest contributor to the total number of building plans approved in January. 74 New units worth N$47.7 million were approved during the month, representing a 6.9% decrease from the N$51.3 million worth of approvals in the first month of 2021. On a 12-month cumulative basis, residential units recorded a 20.7% y/y increase in value. 30 New residential units worth N$17.1 million were completed during the month. 

3 New commercial units, valued at N$5.5 million, were approved in January. This compares to 1 unit valued at N$7.0 million approved in January 2021. On average over the last 20 years, 4 commercial units valued at N$26.5 million were approved in the first month of the year. On a rolling 12-month perspective, the number of commercial and industrial approvals have increased to 39 units worth N$169.9 million as at January, compared to the 36 approved units worth N$202.2 million over the corresponding period a year ago. 1 Commercial unit worth N$140,000 was completed in January.

The 12-month cumulative number of building plans approved increased by 9.7% y/y in January. A total of 2,505 building plans to the value of N$2.01 billion were approved over the last 12 months which represents an increase in value terms of 14.9% y/y. Additions to properties, which are generally smaller projects, continue to make up the lion’s share of building plan approvals, although residential units are encouragingly starting to make up a larger portion of overall approvals. Since March 2020, the number of commercial and industrial approvals have remained in the low single digit territory, signalling a lack of investment from businesses. It is evident that the Namibian construction industry continues to tread water as the value of approvals continues to decline in real terms, as the chart above shows.