Category Archives: Economic Research

Economic Research

PSCE – November 2021

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Overall

Private sector credit (PSCE) increased by N$337.1 million or 0.32% m/m in November, bringing the cumulative credit outstanding to N$106.7 billion. On a year-on-year basis, private sector credit increased by 1.56% in November, down from growth of 2.69% y/y in October. On a 12-month cumulative basis N$1.64 billion worth of credit was extended to the private sector. Individuals continue to constitute the majority of the cumulative issuance.

Credit Extension to Individuals

Credit extended to individuals increased by 0.5% m/m after two consecutive months of contractions. On a year-on-year basis, credit extended to individuals rose by 2.55% in November. On a month-on-month basis, other loans and advances’ (consisting of credit card debt, personal- and term loans) increased by 0.2% m/m. Mortgage loans and overdrafts also recorded minor growth at 0.7% m/m and 0.1% m/m, respectively. Instalment credit shrunk by 0.4% m/m. On a year-on-year basis all subcategories of loans & advances, bar overdrafts, posted increases in November. Overdrafts contracted by 3.8% y/y in November. Mortgage loans increased by 3.4% y/y and other loans and advances grew by 2.3% y/y.

Credit Extension to Corporates

Credit extended to corporates grew by 0.17% m/m and 0.62% y/y in November. Total corporate loans & advances contracted by 0.2% m/m. Mortgage loans grew by 0.8% m/m, other loans and advances grew by 0.2% m/m. Overdrafts declined by 2.3% m/m. Instalment credit grew by 4.1% m/m, the largest increase since June 2019. The trend is broadly similar on year-on-year basis. Total corporate loans & advances remained steady in November, with all sub-categories except overdrafts recording increases.

Banking Sector Liquidity

The overall liquidity position of Namibia’s commercial banks increased in November, rising by N$1.61 billion to an average of N$3.84 billion. The BoN attributes the increase to cash inflows from asset managers, as well as inflows from the subscription of MTC shares. The repo balance rose to N$393.7 million at the end of the month after ending October at N$200.9 million.

Reserves and Money Supply

Broad Money Supply (M2) increased by N$3.50 billion or 2.8% y/y in November, according to the BoN’s latest monetary statistics. The money supply increased by 0.8% m/m, increasing to N$129.9 billion after ending October at N$128.8 billion. The BoN’s stock of international reserves contracted by 14.3% m/m to N$41.0 billion in November. The large decline was due to the redemption of the Eurobond as well as commercial bank foreign currency purchases during the month, according to the BoN.

Outlook

Overall, PSCE growth remained subdued and in line with what has been seen so far in 2021. The rolling 12-month issuance is down 41.3% y/y to N$1.64 billion. Credit extended to corporates as well as individuals have displayed a similar sluggish trend to that of 2020. This reflects the current lack of optimism in the Namibian economy. Despite providing relief to strained businesses and individuals alike, historically low interest rates have failed to achieve notable economic stimulus. As such, PSCE is expected to remain relatively flat in the near-term.

NCPI November 2021

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Namibia’s annual inflation rate rose to 4.1% y/y in November, with prices in the overall NCPI basket increasing by 0.6% m/m. Year-on-year, overall prices in eight of the twelve categories rose at a quicker rate in November than in October, two categories experienced slower rates of inflation and two categories posted steady inflation. Prices for services rose by 2.4% y/y and prices for goods rose by 5.4% y/y.

Transport was the largest contributor to annual inflation in November, with prices in this category increasing by 1.5% m/m and 11.9% y/y. This basket item contributed 1.6 percentage points to the annual inflation rate in November. Prices in all three sub-categories recorded price increases, with the sharpest increase coming in “operation of personal transport equipment”. This is due mostly to a 27.4% y/y increase in the price of petrol and diesel. This is the largest year-on-year price increase in fuel seen so far this year. As was the case last month, this increase is explained by both base effects and an ongoing shortage in global oil supply.

Predictably, food & non-alcoholic beverages was the second biggest contributor to the annual inflation rate in October, contributing 1.0 percentage points.  Prices in this basket item increased by 0.3% m/m and 5.2% y/y. On a yearly basis all sub-categories, except for vegetables & tubers, registered price increases. Namibia’s continued reliance on South Africa for food imports means than whenever transport costs rise it is all but inevitable that the price of food will rise accordingly.

Inflation rates in the remainder of the categories were relatively subdued. Alcohol & Tobacco was the third largest contributor to November’s annual inflation rate, with prices increasing by 2.0% m/m and 2.8% y/y. The prices of alcoholic beverages, the more heavily weighted of the two sub-categories in this basket, increased by 2.3% y/y while the price of tobacco products, the other sub-category, increased by 5.2% y/y in November.

The 4.1% y/y annual inflation rate for November came in above IJG’s average inflation forecast for the month. IJG’s last estimate was that inflation would rise to 3.8% y/y in November. A hawkish shift in the Fed’s tone has led to debate as to whether the US central bank will taper asset purchases at a faster rate than it had previously indicated. This, as well as a 25bps SARB rate hike in late November, lends credence to the argument that inflation risks both globally, and in southern Africa, remain to the upside. In our previous report our inflation model forecast average annual inflation for 2022 at 3.9% y/y. A spike in Namibia’s CPI and a deterioration in the rand has pushed that estimate up to 4.2% y/y. The estimated upper bound for average annual inflation in Namibia for 2022 is now 5.2% y/y.

Building Plans – November 2021

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In November the City of Windhoek approved 263 building plans, a 3.0% m/m decrease from the 271 approved in October. The total value of approvals decreased by 2.1% m/m to N$216.9 million. On a 12-month cumulative basis, the number of approvals has risen by 9.3% y/y to 2,468 but the value of these approvals has declined by 1.1% y/y to N$1.92 billion. Year-to-date there have been 2,353 approvals valued at N$1.85 billion. 139 construction projects were completed in November at a value of N$99.9 million. In terms of value, this equates to a 147.1% y/y increase and a 71.0% m/m increase. However, on a 12-month cumulative basis the value of completed projects is down 46.3% y/y.  

185 additions to properties were approved at a value of N$107.9 million in November, making November the best month, in terms of value, for addition approvals in 2021. This represents a 12.1% y/y increase in number and 13.5% y/y increase in value. Month-on-month this translates to a 7.5% decrease in number but a 37.9% increase in value. 47 additions to properties were completed in November at a value of N$11.1 million. The latter months of 2020 saw a particularly slow rate of construction completions, therefore the year-on-year change in the value of additions completed has doubled (approximately 101.1% y/y increase in value). On a year-to-date basis, the number of additions to properties completed stands at 855, at a value of N$233.8 million. While the number of additions completed by this time last year is similar (866 by November 2020) the value of those additions stood significantly higher, at N$444.8 million.   

75 residential units were approved in November at a value of N$105.5 million, translating to an 8.7% m/m increase in number and a 29.6% m/m increase in value. Year-to-date 808 units have been approved at a value of N$968.8 million. These numbers compare favourably to last November’s year-to-date figures when only 610 residential units were approved at a value of N$798.2 million. Accordingly, on a 12-month cumulative basis, the value of residential approvals increased by 9.3% y/y and the number of approvals by 7.9% y/y. 90 residential units were completed in November at a value of N$70.8 million, making November the best month for the number of residential unit completions in 2021. On a 12-month cumulative basis the number of residential properties completed now stands at 596, with a collective value of N$540.6 million. Following the trend seen in completions of additions to properties, the 12-month cumulative value figure for residential units completed has fallen by 46.3% y/y.

In November three commercial units with a combined value of N$3.5 million were approved. Year-to-date 34 commercial units worth N$160.3 million have been approved. In terms of value, that’s 47.4% lower than at the same time last year. Two commercial units were completed in November at a value of N$18.1 million. After six consecutive months with zero completions Windhoek has now seen back-to-back months with commercial completions, the first time that has happened in 2021. Encouragingly, this means that the year-to-date value of commercial construction projects completed is higher now than it was at the same time in 2020.

On a 12-month cumulative basis, the number of building plans completed fell by 8.3% y/y and by 46.3% y/y in terms of value. Given the severity of the general economic contraction in the past 18 months this is not surprising. The year-on-year change of the 12-month cumulative value of plans completed is therefore likely to remain negative for several more months.

As the year draws to a close, we now have a sufficiently detailed picture of how well the construction industry faired in 2021. In a phrase, 2021 was not all that bad. The year-to-date figure for total building plan approvals stands at N$1.85 billion, that’s a 3.9% y/y increase from the N$1.78 billion approved by last November. The success and rate with which these approvals are converted into completions will go a long way to determining the fortunes of the construction sector in 2022.  While the year-to-date value of total building completions remains well off 2020 levels, in the context of the last five years the figure (N$796.5 million y-t-d completions by November 2021) doesn’t look out of place (5-year November average; N$913.8 million).