Category Archives: Economic Research

Economic Research

PSCE – December 2021

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Overall

Private sector credit (PSCE) declined by N$305.1 million or 0.29% m/m in December, bringing the cumulative credit outstanding to N$106.4 billion. PSCE increased by just 1.0% y/y in 2021, following an already slow increase of 1.6% y/y in 2020, and the slowest increase on our records dating back to 2004. On a 12-month cumulative basis N$1.05 billion worth of credit was extended to the private sector. Of this cumulative issuance, individuals took up N$1.27 billion, while corporates reduced their borrowings by N$48.5 million and the non-resident private sector repaid N$173.3 million of their borrowings.

Credit Extension to Individuals

Credit extended to individuals remained steady in December. On a year-on-year basis, credit extended to individuals rose by 2.1% in December, although the growth has been slowing for four consecutive months. Overdraft facilities to individuals increased by 0.4% m/m, but declined 3.3% y/y in December. Other loans and advances (consisting of credit card debt, personal- and term loans) rose by 0.2% and 2.8% y/y. Growth in mortgage loans to individuals has been slowing since April, declining by 0.3% m/m but increasing by 2.6% y/y. 

Credit Extension to Corporates

On both a monthly and annual basis credit extended to corporates contracted for a second consecutive month, decreasing by 0.58% m/m and 0.11% y/y, as corporates continued to de-lever their balance sheets in 2021. Overdrafts declined by 5.5% m/m and 13.1% y/y. Mortgage loans to corporates fell by 0.3% m/m, but rose by 5.8% y/y. Instalment credit growth remained subdued, decreasing by 1.8% m/m, but increasing by 5.6% y/y, although it is from a very low base. Other loans and advances rose by 2.5% m/m and 3.1% y/y in December.

Banking Sector Liquidity

The overall liquidity position of the commercial banks strengthened during December, rising by N$1.01 billion to an average of N$4.86 billion. The BoN ascribed the increase to seasonal movements driven by corporates, in preparation for their annual tax payments. The strong liquidity position meant that the repo balance stood at zero at the end of the month after ending November at N$393.7 million.

Reserves and Money Supply

According to the BoN’s latest monetary statistics, Broad Money Supply (M2) rose by N$5.30 billion or 4.2% y/y in December to N$129.9 billion. The stock of international reserves increased by 6.9% m/m to N$43.9 billion in December. The increase was attributed to increased foreign asset swaps during the month, according to the BoN. 

Outlook

Overall, PSCE growth remained very subdued in 2021, with half of the months recording a contraction on a month-on-month basis. The 12-month issuance of N$1.05 billion is 35.7% lower than the issuance of 2020. Historically-low interest rates continued to provide overindebted consumers and businesses relief in the form of lower interest payments, but did not stimulate lending as consumer and business confidence remained low. 

We expect the BoN to raise rates by 25 basis points at its February MPC meeting, following the SARB’s decision to do so in January. The interest rate buffer between the two central banks that has been in place for most of 2020 and 2021 has been closed, after the BoN decided to not raise rates in December. Namibia’s reserve level remains strong, and we therefore do not expect the BoN to raise rates higher than SA’s in the short-term. Inflationary pressure is gradually picking up in both South Africa and Namibia and as a result we expect both central banks to increase rates between 75- and 125-basis points during the year.

New Vehicle Sales – December 2021

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A total of 734 new vehicles were sold in December, which is 21 vehicles fewer than were sold in November but represents a 4.3% y/y increase from the 704 new vehicles sold in December 2020. Year-to-date 9,428 new vehicles have been sold, which is 23.9% higher than during 2020, but 9.5% lower than in 2019. As the chart below indicates, this makes 2021 the second-worst year for new vehicle sales in the past decade. Of the 9,428 new vehicles sold during the year, 4,484 were passenger vehicles, 4,178 were light commercial vehicles, and 766 were medium and heavy commercial vehicles.

362 new passenger vehicles were sold during December, representing a 4.5% m/m contraction, but an 8.4% y/y increase. 4,484 new passenger vehicles were sold in 2021, a significant increase of 39.7% from 2020. Encouragingly, new passenger vehicle sales for the year were just 1.8% lower than in 2019, indicating that passenger vehicle sales have more or less rebounded to their pre-pandemic level, although this is still a far cry from the sales figures seen during 2013-2015.

A total of 372 commercial vehicles were sold in December, five fewer than in November but two more than in December 2020. During the month, 315 light commercial vehicles, 18 medium and 39 heavy commercial vehicles were sold. For the year, light commercial vehicle sales rose by 8.0% y/y, medium commercial vehicle sales increased by 18.0% y/y and heavy commercial vehicle sales climbed by 56.0% y/y. Thus, while all three commercial vehicle sales categories have rebounded from the low sales figures recorded in 2020, heavy commercial vehicle sales have encouragingly recorded the best annual sales since 2015.

Toyota led the market for new passenger vehicle sales in 2021, claiming 30.1% of the market, followed by Volkswagen with a 26.6% share. They were followed by Kia and Suzuki at 9.0% and 5.9%, respectively. The only other manufacturer that managed to breach the 5% market share mark was Hyundai with 5.6% of the market, leaving the remaining 22.8% of the market to other brands.

Toyota dominated the light commercial vehicle space in 2021 with a 52.8% market share, with Nissan in second place with a 12.8% market share. Ford and Isuzu claimed 12.6% and 5.1%, respectively, of the number of new light commercial vehicles sold for the year. Hino led the medium commercial category with 30.5% of sales while Scania was number one in the heavy and extra-heavy commercial vehicle segment with 25.4% of the market share during the year.

The Bottom Line  

While new vehicle sales for the year have rebounded from the dismal figures seen in 2020, 2021 was still the second-worst year for vehicle sales in the past decade. The recovery has predominantly been driven by a rebound in passenger vehicle sales, with total commercial vehicle sales still lagging well behind 2019 levels. The strong increase in heavy commercial vehicle sales is however welcome news as it suggests that a few companies and mines upgraded their fleets indicating business optimism. With there being few signs that 2022 will see significant economic growth, we expect new vehicle sales figures to remain more or less in line with 2021’s.

NCPI December 2021

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Namibia’s annual inflation rate rose to 4.5% y/y in December, with prices in the overall NCPI basket increasing by 0.4% m/m. The annual average inflation rate for 2021 was 3.6%, compared to 2.2% in 2020 and 3.7% in 2019. Year-on-year, overall prices in three of the twelve categories rose at a quicker rate in December than in November, six categories experienced disinflation and three categories posted steady inflation. Prices for services rose by 2.7% y/y and prices for goods rose by 5.8% y/y.

Transport continues to be the largest contributor to annual inflation, with prices in this category increasing by 2.1% m/m and 14.3% y/y. This basket item contributed 2.0 percentage points to the annual inflation rate in December. Prices in two of the three sub-categories recorded price increases, with the “operation of personal transport equipment” increasing by 19.7% y/y. This is mostly attributable to a 36.1% y/y increase in the price of petrol and diesel. This was the largest year-on-year increase in fuel prices for 2021. Current forecasts are that global oil prices will continue to increase this year with some analysts predicting that a lack of production capacity and limited investment in the sector will result in demand outstripping supply. We thus expect fuel prices to remain elevated for the majority of 2022.

Food & non-alcoholic beverages was the second biggest contributor to the annual inflation rate in December, contributing 0.9 percentage points. Prices in this basket item remained steady on a monthly basis but increased by 5.1% y/y. Only one sub-category, vegetables, recorded a decrease in prices on an annual basis of 1.1%. The twelve other sub-categories all recorded price increases on an annual basis. Fruit prices increased by 14.9% y/y, oils and fats by 11.9% y/y and meat prices by 11.8%.

Alcohol & Tobacco inflation accelerated from 2.8% y/y in November to 3.8% y/y in December and was the third-largest contributor to December’s annual inflation rate. The prices of tobacco products rose by 0.8% m/m and 6.2% y/y, while the prices of alcoholic beverages increased by 0.4% m/m and 3.2% y/y.

The 4.5% y/y annual inflation rate for December was in line with IJG’s average inflation forecast of 4.3% y/y for the month. IJG’s inflation model forecasts an average inflation rate of 4.3% y/y in 2022 and 3.5% in 2023. Following the SARB’s 25 basis point hike last year, South Africa’s inflation rate accelerated to 5.5% y/y in November, uncomfortably close to the SARB’s upper bound of 6.0% y/y. The MPC committee will meet again on 27 January, which will set the stage for the BoN’s next meeting scheduled for 16 February. We expect the BoN to follow suit on any rate decisions made by the SARB.