Category Archives: Economic Research

Economic Research

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.

Building Plans – August 2021

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The City of Windhoek approved 253 building plans in August, a 19.9% m/m increase from the 211 approved in July. The value of approvals increased by 11.1% m/m to N$161.7 million. Year-to-date there have been 1,591 approvals, valued at N$1.25 billion, 15.8% higher in value terms and 17.3% higher in number terms than at the same time last year. On a 12-month cumulative basis, the number of building plan approvals rose by 22.8% y/y to 2,517 as the value of approvals rose by 4.5% y/y to N$2.02 billion. In August, 131 construction projects were completed at a value of N$68.4 billion. This is a marked increase from the number of completions in July when only 36 projects were completed, the second-lowest figure for the year.  Year-to-date, 969 plans, valued at N$517.9 million have been completed, a 60.0% contraction in value terms compared to the same period a year ago.

Additions to properties made up 65% of total approvals in August. 165 additions were approved at a value of N$57.1 million, a 20.4% m/m increase in number, but a 12.0% m/m decrease in value from the N$64.9 worth of addition approvals in July. Year-to-date, 983 additions have been approved at a value of N$466.0 million, a 3.4% decrease in number, but a 2.7% increase in value terms. In August, 78 additions were completed at a value of N$17.18 million. Although the number and value of additions completed per month trend to vary widely – August’s figures sit close to the year-to-date averages.

New residential units were the second largest contributor to the total number of building plans approved with 83 approvals registered in August. In terms of value, the N$84.1 million worth of residential units approved in August represents a 4.7% m/m increase. Year-to-date 583 units worth N$694.9 million have been approved, double the value of residential approvals achieved this time last year. On a 12-month cumulative basis, the number of residential units approved increased by 123.1% y/y and 98.0% in value terms. 53 new residential units worth N$51.2 million were completed in August. This represents a year-to-date decrease in value of 59.8% compared to this time last August. On a 12-month cumulative basis, the number of residential units completed stands is 526 at a value of N$531.8 million. As such, the 12-month cumulative value of completed residential units decreased, by 45.1% y/y, for the first time in over a year.  

In August five commercial units, valued at N$20.4 million, were approved. Year-to-date, 25 commercial buildings at a value of N$87.8 million have been approved.  No commercial building projects have been completed since March. This is the longest run of zero completions in the commercial construction sector since independence. Commercial projects continue to be approved; they are not being completed.

On a 12-month cumulative basis, the number of buildings completed fell by 42.9% y/y, translating to a 57.4% y/y decrease in value. There is a simple, mechanical explanation for this. Namibia’s first hard lockdown of 2020 put a pause on all building projects. In April of that year no construction projects; be that additions, residential units or commercial projects were completed. This is likely to have created a glut of unfinished construction projects. As construction sites reopened, the following five months saw a massive spike in the value of completed projects. For example, in August of 2020 the value of completed construction projects was N$395.0 million – the most ever added in one month. This August’s figure for the 12-month cumulative value of completed construction projects is the first this year to not consider the large, distorted, values of completed projects from the May 2020 – September 2020 post-lockdown period. The 12-month cumulative value of plans completed now, despite the large decrease recorded this August, gives a more accurate picture of the short-term trends and current conditions in the Namibian construction industry.