Category Archives: Economic Research

Economic Research

PSCE – October 2021

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Overall

Private sector credit (PSCE) increased by N$700.0 million or 0.66% m/m in October, bringing the cumulative credit outstanding to N$106.4 billion. On a year-on-year basis, private sector credit increased by 2.69% in October, down slightly from growth of 2.74 % y/y in September. On a 12-month cumulative basis N$2.79 billion worth of credit was extended to the private sector. Individuals continue to take up the majority of this cumulative issuance. After two months of consecutive month-on-month declines in total claims on the private sector, in July and August, total claims have now risen month-on-month in both September and October. Over the long–term the outlook is less encouraging. From the start of 2015 until December 2019, PSCE grew by an average of 9.41% y/y. Since the start of 2020 average year-on-year growth has fallen to 2.75% y/y, despite several interest rate cuts last year. A positive reversion in this trend seems unlikely in the short-term.

Credit Extension to Individuals

Credit extended to individuals decreased by 0.11% m/m but increased by 2.78% y/y in October. On a month-on-month basis, ‘other loans and advances’ (consisting of credit card debt, personal- and term loans) increased by 1.7% m/m. The other two subcategories of loans & advances, namely mortgage loans and overdraft, shrunk by 0.2% m/m and 2.2% m/m in October. Instalment credit shrunk by 0.8% m/m. On a year-on-year basis all subcategories of loans & advances registered increases in October. Mortgage loans increased by 3.2% y/y, other loans and advances grew by 2.6% y/y and overdrafts grew by 1.2% y/y. Overall growth of credit extended to individuals remains sluggish. In the four years prior to 2020, total credit extensions to individuals grew at an average of 8.1% y/y. Since 2020 that figure has fallen to 4.6% y/y.

Credit Extension to Corporates

Credit extended to corporates grew by 1.78% m/m and 3.00% y/y in October. Total corporate loans & advances grew by 1.7% m/m. Specifically, mortgage loans grew by 2.3% m/m, other loans and advances grew by 1.3% m/m and overdrafts grew by 1.6% m/m. Instalment credit grew by 2.4% m/m. The trend is broadly similar on year-on-year basis. Total corporate loans & advances grew by 2.8% y/y in October, with all sub-categories recording increases. This is also the first time in 2021 that there have been two successive month-on-month increases in credit extensions to corporates, although the growth is subdued.

Banking Sector Liquidity

The overall liquidity position of Namibia’s commercial banks increased in October, rising by N$832.9 million to an average of N$2.23 billion. The BoN attributes the increase to cash inflows from diamond sales, coupon payments and increased government expenditure. Accordingly, the total balance of repos outstanding decreased in October. The repo balance fell to N$200.9 million at the end of the month after ending September at N$907.7 million.

Reserves and Money Supply

Broad Money Supply (M2) increased by N$5.70 billion or 1.0% y/y in October, according to BoN’s latest monetary statistics. The money supply increased by 4.6% m/m, increasing to N$128.8 billion after ending September at N$123.1 billion. The broad money supply for September was revised upwards marginally by approximately N$215.5 million. The BoN’s stock of international reserves rose by 4.4% m/m to N$47.9 billion in October.

Outlook

PSCE growth in October remained subdued, in line with the sluggish trend in growth that has now persisted for the best part of two years. The South African Reserve Bank’s (SARB) monetary policy committee (MPC) raised the South African Repo Rate for the first time in almost three years during its last meeting on 18 November. The rate hike came off the back of elevated inflation that threatened to rise beyond 6.0% y/y, the upper-bound of the SARB’s inflation target. While the rate hike may ease inflation concerns it will not stimulate growth in the private sector credit markets. Despite this hike, Namibia’s repo rate is now equal to the that of South Africa’s, so there is no immediate need for the BoN’s MPC to hike, however we expect them to follow suit at the 15 December meeting. Regardless, there are plenty of external forces conspiring to supress growth in private sector credit extensions and not all that many working to stimulate it. Weak growth is likely to continue in the short to medium-term.

Building Plans – October 2021

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In October the City of Windhoek approved 271 building plans, an 18.9% m/m increase from the 228 approved in September. The total value of approvals increased by 40.2% m/m to N$221.7 million. Year-to-date there have been 2,090 approvals, valued at N$1.63 billion. This year-to-date figure is only 5.8% higher in value terms than at the same time last year. With only two months left in the year it is likely that the value of building plans approved in 2021 will be similar to that of 2020. On a 12-month cumulative basis, the number of approvals rose by 13.9% y/y to 2,476 while the value of these approvals rose by 6.1% y/y to N$1.94 billion. 86 construction projects were completed in October at a value of N$58.4 million. Year-on-year this equates to a 32.2% increase in number and 6.54% increase in value. Given that September saw yearly highs in both the number and value of projects completed the month-on-month changes in completions come in at a somewhat distorted 63.2% decrease in number and 51.4% decrease in value. On a 12-month cumulative basis the value of completed projects is down 55.7% y/y.

200 additions to properties were approved at a value of N$78.3 million, a 39.9% m/m increase in number and 22.0% m/m increase in value from September. Year-to-date, 1,326 additions have been approved at a value of N$608.5 million. Broadly consistent with 2020’s figures, this represents a 1.9% y/y decrease in number and 5.2% y/y increase in value from the same time last year. 43 additions were completed in October at a value of N$10.43 million. Given the large variance in both the number and value of additions completed over the last 24 months there is not much insight to be gained from looking at the month-on-month and year-on-year changes in the number and value of additions completed, suffice to say that October was a marginally below (pandemic-era) average month for addition completions.

69 new residential units were approved in October at a value of N$81.4 million. This represents a 14.8% m/m decrease in number and 6.3% m/m decrease in value from September’s figures. Year-to-date, 733 units have been approved at a value of N$863.2 million. This represents a year-to-date increase in the number and value of residential units by 44.9% y/y and 29.6% y/y respectively. On a 12-month cumulative basis, the number of residential units approved increased by 59.1% y/y and 24.9% y/y in value.  41 new residential units were completed in October at a value of N$32.6 million. This translates to a 12.8% y/y decrease in number and 17.0% y/y decrease in value. Additionally, October’s completion figures equate to a 43.1% m/m decrease in number and 56.8% m/m decrease in value. On a 12-month cumulative basis, the number of residential properties completed stands 557, at a value of N$504.8 million. This represents a 12-month cumulative decrease in value of 52.0% y/y.

In October two commercial units, with a combined value of N$62.0 million, were approved. In terms of value, this was the best month for approvals of commercial construction projects in 2021. So, while year-to-date the number of commercial projects approved increased by only two, from 29 in September to 31 in October, the year-to-date value of commercial approvals increased by a much more substantial 65.4%, from N$94.8 million to N$156.8 million. A streak of six consecutive months with zero commercial building project completions was finally snapped in October as two commercial projects were completed at a value of N$15.35 million. In terms of value, October was the best month for commercial construction project completions in just over two years.

On a 12-month cumulative basis, the number of building plans completed fell by 22.5% y/y and 55.7% y/y in terms of value. The year-on-year change of the 12-month cumulative value of plans completed will likely, as alluded to in previous reports, remain negative for several more months as the effects of the pandemic and past lockdowns continue to weight on the figure.

12-month cumulative approvals are up 13.9% y/y in number and 6.1% y/y in value. While this doesn’t read as a resounding comeback story for the construction industry, it does at least show that the flow of approvals remains consistent.  

New Vehicle Sales – October 2021

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714 new vehicles were sold in October, the second lowest monthly sales figures for 2021. This comes after 767 vehicles were sold in September. Fewer passenger vehicles, light commercial vehicles and heavy commercial vehicles were sold in October than in September. Only the number of medium commercial vehicles sold increased, from 16 in September to 22 in October. Year-to-date, a total of 7,935 new vehicles have been sold. Despite the low monthly sales figure, new vehicle sales increased by 27.3% y/y in October. On a 12-month cumulative basis, vehicle sales have grown by 19.7% to 9,339.

356 new passenger vehicles were sold in October, 24 fewer than in September. This translates to a 6.3% m/m decrease, but a 19.5% y/y increase. On a 12-month cumulative basis, new passenger vehicle sales have increased by 38.0% y/y to 4,414. Despite being a somewhat weaker month for passenger vehicle sales, October’s sale figure is not far off the average monthly sales figure for the past 12 months. 

Total commercial vehicle sales declined by 7.5% m/m but increased by 36.1% y/y in October. The biggest month-on-month decline in both absolute number and percentage terms came in the heavy commercial vehicles category. The 41 heavy commercial vehicles sold is 26 fewer than in September, representing a 38.8% m/m decrease in sales. That said, heavy commercial vehicle sales are up 46.4% y/y. Light commercial vehicle sales followed a similar pattern. 295 light commercial vehicle sales in October translates to a 3.0% m/m decrease, but 35.9% y/y increase in sales.  22 medium commercial vehicles were sold in October, an increase of 37.5% m/m and 22.2% y/y.

Toyota and Volkswagen remain the pre-eminent brands in the passenger vehicle market. Toyota’s year-to-date market share is 29% and Volkswagen’s is 28%. To illustrate their dominance, even if the market shares of the next four largest brands are combined (Kia, Suzuki, Hyundai and Haval, in that order) their stake is still smaller than that of Volkswagen.    

On a year-to-date basis, Toyota has the largest market share of light commercial vehicles. Toyota’s market share in the category declined marginally from 54% in September to 53% in October. The medium commercial vehicles sector remains more competitive, with both Hino and Mercedes taking a 30% share of the market. Scania, Volvo and Man are the biggest players in the heavy and extra heavy commercial vehicle market, with 25%, 19% and 15% market shares respectively.  

The Bottom Line  

October 2021 was a below average month for both passenger and commercial vehicle sales in Namibia, all but confirming that 2021 will be the second worst year for new vehicle sales in the past decade. This did not necessarily appear to be the case at the beginning of the year. In the first two months of 2021 more new vehicles were sold than in the first two months of 2019. Then the figures started to diverge. Global headwinds in the form of supply chain bottlenecks and semiconductor shortages interacted with domestic lockdowns through-out the year to effectively drag down sales during 2021. Finally, as December usually sees below yearly-average vehicle sales, regardless of the underlying health of the economy, there is even less chance that new vehicle sales in 2021 will rise to, or past, 2019 levels.