Category Archives: Economic Research

Economic Research

NCPI – April 2021

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The Namibian annual inflation rate rose to 3.9% y/y in April, with prices in the overall NCPI basket increasing by 0.4% m/m. On a year-on-year basis, overall prices in six of the twelve basket categories rose at a quicker rate in April than in March and three of the basket categories recording slower rates of inflation, while three of the basket categories remained constant. Prices for goods increased by 5.2% y/y while prices for services rose by 2.1% y/y.

Food & non-alcoholic beverages, the second largest basket item by weighting, continued to be the largest contributor to annual inflation, accounting for 1.2 percentage points of the total 3.9% inflation rate. Prices in this category increased by 0.4% m/m and 5.9% y/y. Prices in eleven of the sub-categories recorded price increases on an annual basis, while warm beverage prices fell 0.5% y/y and non-alcoholic beverage prices remained unchanged. The largest increases were observed in the prices of meat which increased by 15.83% y/y, fruit which rose by 10.55% y/y and oils and fats, which increased by 7.50% y/y.

The alcoholic beverages and tobacco basket item was the second largest contributor to the annual inflation rate in April, with prices increasing by 4.2% y/y. On a monthly basis, prices in this basket item rose by 0.4%. The alcoholic beverages sub-category recorded a price increase of 0.3% m/m and 3.3% y/y. Tobacco prices rose 1.1% m/m, and 8.3% y/y.

The housing and utilities, transport, and miscellaneous categories each accounted for 0.30 percentage points of the total annual inflation rate in April. Price inflation for housing and utilities remained steady on a monthly basis but rose 1.3% y/y. The regular maintenance and repair of dwellings subcategory recorded an increase in prices of 6.8% y/y. Prices in the electricity, gas and other fuels subcategory rose 0.9% y/y, while the annual inflation for rental payments stood at 1.3% y/y. Transport prices rose 1.2% m/m and 7.5% y/y, which was driven by the operation of personal transport equipment, which rose 1.9% m/m and 8.1% y/y, the increase resulting from a low fuel price base a year ago. Prices in the miscellaneous category rose 0.4% m/m and 6.6% y/y.

The rising inflation rate is to be expected as, the measurement period includes a low base, due to the lockdown restrictions that constrained economic activity a year ago and Namibia is in now a recovery phase of the business cycle as it emerges from a trough. IJG’s inflation model forecasts an average inflation rate of 3.6% y/y in both 2021 and 2022, indicating moderate inflation over the next two years. Seeing as inflation seems to be relatively contained and expectations for economic growth are also relatively low, we expect the central banks to remain reluctant to intervene with tighter monetary policies such as hiking interest rates. The South African Reserve Bank’s Monetary Policy Committee will meet this week and the South African repo rate is expected to remain steady at 3.5%.

New Vehicle Sales – April 2021

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755 new vehicles were sold in April, a decrease of 17.9% m/m from the 919 vehicles sold in March. As at 30 April, 3,260 new vehicles were sold for the year, of which 1,489 were passenger vehicles, 1,516 light commercial vehicles, and 255 medium and heavy commercial vehicles. By comparison, the first four months of 2020 saw 2,270 new vehicles sold. 2021 is thus off to a better start compared to last year, although vehicle sales were adversely affected by strict lockdown restrictions during April last year. Due to car dealerships being closed last year April as a result of the strict lockdown measures, year-on-year comparisons are somewhat meaningless. On a twelve-month cumulative basis, a total of 8,601 new vehicles were sold as at April 2021, representing a contraction of 8.5% from the 9,398 sold over the comparable period a year ago.

A total of 358 new passenger vehicles were sold during April, decreasing by 2.2% from the 366 passenger vehicles sold in March. Year-to-date, passenger vehicle sales rose to 1,489, 55.8% higher than during the same period in 2020, mostly as a result of the low sales in April 2020. On a rolling 12-month basis, passenger vehicle sales rose to 3,743, 5.0% lower than in April 2020.

A total of 397 new commercial vehicles were sold in April, representing a decrease of 28.2% m/m. 322 Light commercial vehicles, 20 medium commercial vehicles, and 55 heavy and extra heavy commercial vehicles were sold during the month. Light commercial vehicle sales fell 34.4% m/m, medium commercial vehicle sales dropped 16.7% m/m and heavy commercial vehicle sales increased by 44.7% m/m. On a twelve-month cumulative basis, light commercial vehicle sales have declined by 10.0% y/y, medium commercial vehicles fell by 32.8% y/y, and heavy commercial vehicles dropped 7.7% y/y.

Volkswagen continues its dominance in the new passenger vehicle sales segment with 34.7% of the segment sales year-to-date, followed by Toyota with 24.9% of the market share. The two top brands maintained their large gap over the rest of the market with Kia and Suzuki following with 6.9% and 5.3% of the market, respectively, leaving the remaining 28.2% of the market to other brands.

On a year-to-date basis, Toyota continued as the leader in the light commercial vehicle space with a 53.4% market share, Nissan maintained second place with a 13.8% market share. Ford and Isuzu claimed 12.0% and 6.7%, respectively, of the number of light commercial vehicles sold thus far in 2021. Hino leads in the stagnant medium commercial vehicle segment with 26.1% of sales year-to-date, followed by Mercedes, with 23.9% market share. Scania remained number one in the heavy and extra-heavy commercial vehicle segment with 27.6% of the market share year-to-date.

The Bottom Line

Despite tallying the second lowest total vehicle sales thus far in 2021, the 755 total sales are still well above the monthly average of 634 sales in 2020. The cumulative 12-month total vehicle sales rose for the fourth consecutive month since December 2020. This seems to reflect a gradual recovery in the industry. Although vehicle sales have a minor impact on the overall Namibian economy through its relatively small GDP multiplier, it does reflect overall consumer and business confidence. New passenger vehicle sales have been rather steady, revolving around its mean of 372 passenger vehicle sales per month, slightly below 2019 levels of 380, but well above the 291-monthly average in 2020 (excluding April 2020.) Overall, this reflects a recovery in consumer confidence towards pre-Covid-19 levels. However, on the commercial side, uncertainty remains as commercial vehicle sales have been volatile, but remains above average levels in 2020, although still lagging pre-Covid-19 levels. This indicates a slower recovery rate in optimism in the commercial sector compared to consumers.

PSCE – March 2021

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Overall

Private sector credit (PSCE) fell by N$337.6 million or 0.3% m/m in March, bringing the cumulative credit outstanding to N$105.3 billion. On a year-on-year basis, private sector credit grew by 1.55% in March, compared to the 1.76% y/y growth recorded in February. On a rolling 12-month basis, N$1.61 billion worth of credit was extended to the private sector. Of this cumulative issuance, individuals took up credit worth N$1.52 billion, while N$544.5 billion was issued to corporates. The non-resident private sector decreased its borrowings by N$455.5 million.

Credit Extension to Individuals

Credit extended to individuals increased by 2.57% y/y in March, on par with February’s increase of 2.58% y/y. On a monthly basis, household credit grew by 0.4% following the increase of 0.6% m/m recorded in February. Mortgage demand by individuals remained relatively strong, increasing by 0.5% m/m and 4.4% y/y. Instalment credit remained depressed, increasing by only 0.2% m/m, but contracting by 3.5% y/y. Overdraft facilities extended to individuals have increased by 0.9% m/m and 1.5% y/y.

Credit Extension to Corporates

Credit extension to corporates contracted for a second consecutive month, declining by 1.1% m/m, following the 0.6% m/m contraction recorded in February. On an annual basis, however, credit extension to corporates recorded low growth of 1.3% y/y in March, compared to the 1.6% y/y growth registered in February. All segments contracted on a monthly basis. Mortgage loans to corporates contracted by 0.1% m/m, other loans and advances (OLA) fell 0.4% and overdrafts declined 3.0% m/m. On a year-on-year basis, mortgage loans contracted 3.6%, while OLA and overdrafts increased 0.6% and 13.0% respectively.

Banking Sector Liquidity

The overall liquidity position of commercial banks improved during February, increasing by N$1.12 billion to reach an average of N$2.60 billion. According to the BoN, liquidity spikes are generally observed in March, as budget execution protocols are accelerated before the close of the fiscal year. Additional inflows of funds were observed at the end of March as pension funds repatriated assets to comply with domestic asset requirements, according to the BoN. The outstanding balance of repo’s varied quite a lot during the month, fluctuating between N$20.1 million and N$868.1 million, before falling to zero at month-end.

Reserves and Money Supply

As per the BoN’s latest money statistics release, broad money supply rose by N$11.1 billion or 9.5% y/y in March. Foreign reserve balances rose by N$2.32 billion to N$34.7 billion in March. The BoN ascribed the increase to the net purchases of foreign currency by the central bank.

Outlook

Overall, PSCE growth remains subdued, decreasing by N$337.6 million in March, causing monthly growth to revert into negative territory for the first time since September 2020. The rolling 12-month private sector credit issuance is down 71.7% from the N$5.68 billion cumulative issuance as at the end of March 2020, with individuals taking up most (94.5%) of the credit extended over the past 12 months.

The low credit appetite reflects the lack of confidence in the Namibian economy, with businesses continuing to delever their balance sheets and banks being more prudent with lending out money. We expect interest rates to remain at their current, historically low, levels. This should continue to provide overindebted consumers and corporates with relief but is unlikely to drive PSCE growth. The dull PSCE statistics reflects the nation’s poor recent economic performance of late, as it reflects both lower consumption spending as well as lower investments by corporates, which are two vital components of GDP. There are very few catalysts for economic growth at present, and as a result we do not expect to see a recovery in credit extension in the short term.