Category Archives: Economic Research

Economic Research

NCPI – March 2021

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The Namibian annual inflation rate rose to 3.1% y/y in March, with prices in the overall NCPI basket increasing by 0.5% m/m. On a year-on-year basis, overall prices in six of the twelve basket categories rose at a quicker rate in March than in February and five of the basket categories recording slower rates of inflation, while education remained constant. Prices for goods increased by 3.9% y/y while prices for services rose 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 3.1% inflation rate. Prices in this category increased by 1.2% m/m and 6.6% y/y. Prices in all the thirteen sub-categories recorded price increases on an annual basis. The largest increases were observed in the prices of meat which increased by 13.33% y/y, fruit which rose by 10.73% y/y and oils and fats, which increased 9.37% y/y.

The alcoholic beverages and tobacco basket item was the second largest contributor to the annual inflation rate in March, with prices increasing by 3.8% y/y. On a monthly basis, prices in this basket item fell by 0.2%. The alcoholic beverages sub-category recorded a price decrease of 0.4% m/m, but an increase of 2.5% y/y. Tobacco prices rose 0.5% m/m, and 9.8% y/y.

The housing and utilities, transport and miscellaneous categories each accounted for 0.30 percentage points of the total annual inflation rate in March. Price inflation for housing and utilities remained steady on a monthly basis but rose 1.1% y/y. The regular maintenance and repair of dwellings subcategory recorded an increase in prices of 6.4% y/y, which is a higher rate of increase than the 3.1% y/y registered the previous month. Prices in the electricity, gas and other fuels subcategory fell 0.4% y/y, while the annual inflation for rental payments rose to 1.3% y/y. Transport prices rose 2.0% m/m and 2.4% y/y, which was driven by vehicle purchase prices, which rose 8.0% y/y as well as the operation of personal transport equipment, which rose 3.4% m/m and 0.85% y/y. Prices in the miscellaneous category fell 0.1% m/m but rose 6.4% y/y.

Namibia’s inflation rate crept below the South African Reserve Bank’s lower target band of 3.0% for 16 consecutive months, before reaching 3.1% in March 2021. The 16 months of low inflation reflects Namibia’s depressed economy, which contracted further in 2020 due to Covid-19. During this time business activity declined, while unemployment rose, putting downward pressure on prices. Altogether, these factors created a lower base for prices, making increasing inflation inevitable in the recovery of the Namibian economy. Furthermore, rental prices declined 2.3% y/y between December 2019 and December 2020. Due to its 23.3% weighting in the overall basket its effect on overall inflation is amplified. Rental prices however rose 1.34% between December 2020 and March 2021, which increased overall inflation. IJG’s inflation model forecasts an average inflation rate of 3.5% y/y in 2021 and 3.6% in 2022, indicating a gradual increase in the inflation rate over the next two years and that inflation will likely remain relatively low over this period.

New Vehicle Sales – March 2021

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908 New vehicles were sold in March, an increase of 1.68% m/m from the 893 vehicles sold in February, and a 20.3% y/y increase from the 755 sold in March 2020. For the first three months of 2021 2,494 new vehicles have been sold, of which 1,122 were passenger vehicles, 1,192 light commercial vehicles, and 180 medium and heavy commercial vehicles. By comparison, the first three months of 2020 saw 2,221 new vehicles sold. 2021 is thus off to a slightly better start compared to last year. On a twelve-month cumulative basis, a total of 7,885 new vehicles were sold as at March 2021, representing a contraction of 23.3% from the 10,277 sold over the comparable period a year ago.

A total of 357 new passenger vehicles were sold during March, decreasing by 13.1% from the 411 passenger vehicles sold in February. On a year-on-year basis, March new passenger vehicle sales were 13.7% higher than the 314 vehicles sold a year ago. Year-to-date, passenger vehicle sales rose to 1,122, 18.4% higher than during the same period in 2020. On a rolling 12-month basis, passenger vehicle sales rose to 3,384. This translates into four consecutive months of increases in this measure.

A total of 551 new commercial vehicles were sold in March, representing an increase of 14.3% m/m and 24.9% y/y. 489 Light commercial vehicles, 24 medium commercial vehicles, and 38 heavy and extra heavy commercial vehicles were sold during the month. Light commercial vehicle sales rose 25.7% y/y, medium commercial vehicle sales climbed 4.3% y/y and heavy commercial vehicle sales increased by 31.0% y/y. On a twelve-month cumulative basis, light commercial vehicle sales have declined by 22.2% y/y, medium commercial vehicles fell by 42.7% y/y, and heavy commercial vehicles dropped 25.0% y/y.

Volkswagen continues its strong lead in the passenger vehicle sales segment with 34.9% of the segment sales year-to-date, followed by Toyota with 25.1% of the market share. The two top brands maintained their large gap over the rest of the market with Kia and Mercedes following with 7.0% and 5.1% of the market, respectively, leaving the remaining 27.9% of the market to other brands.

On a year-to-date basis, Toyota remained the leader in the light commercial vehicle space with a 53.5% market share, with Nissan in 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 the medium commercial vehicle segment with 26.1% of sales year-to-date, while Scania was number one in the heavy and extra-heavy commercial vehicle segment with 27.6% of the market share year-to-date.

The Bottom Line

March wrapped up the first quarter of 2021 with 908 new vehicles sold, the highest monthly sales figure since October 2019, when 976 new vehicle sales were sold. Total sales for the quarter were 2,494, making it the strongest quarter since the fourth quarter of 2019, when 2,567 new vehicles were sold. This is a positive sign, as vehicle sales continue to recover to pre-Covid-19 levels, which could indicate somewhat increased levels of consumer confidence. The rolling 12-month number of new vehicle sales rose for a third consecutive month to 7,885. The growth is however from a very low base and overall, 12-month cumulative sales is still down 65.2% from its peak in April 2015.

PSCE – February 2021

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Overall

Private sector credit (PSCE) increased by just N$3.2 million in February, bringing the cumulative credit outstanding to N$105.6 billion. On a year-on-year basis, private sector credit grew by 1.76% in February, compared to 1.50% y/y in January. On a rolling 12-month basis, N$1.82 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$687.4 billion was issued to corporates. The non-resident private sector decreased its borrowings by N$382.9 million.

Credit Extension to Individuals

Credit extended to individuals increased by 2.6% y/y in February, on par with January’s increase of 2.5% y/y. On a monthly basis, household credit grew by 0.5% following the decrease of 0.7% m/m recorded in January. The value of mortgage loans extended to individuals grew by 0.8% m/m and 4.5% y/y. Instalment credit remained depressed, increasing by 0.1% m/m, but contracting by 4.1% y/y. Overdraft facilities extended to individuals have increased by 0.3% m/m, but dipped back into negative territory, contracting by 0.3% y/y.

Credit Extension to Corporates

Credit extension to corporates contracted by 0.6% m/m after increasing by 1.3% m/m in January. On an annual basis, however, credit extension to corporates increased by 1.6% y/y in February, compared to the 1.0% y/y growth registered in January. Except for the Other Loans and Advances category (or OLA, which is made up of credit card debt, personal and term loans), all other segments contracted on a monthly basis. OLA to corporates grew by 1.9% m/m and 1.4% y/y. The Bank of Namibia (BoN) attributed the increase to increased uptake by corporations in the mining, retail and manufacturing sectors. Overdraft facilities extended to corporates declined by 2.5% m/m, but rose 12.0% y/y. Instalment credit extended to corporates, which has been contracting since February 2017 on an annual basis, remained depressed, contracting by 1.1% m/m and 9.1% y/y in February. Mortgage loans to corporates decreased by 2.1% m/m and declined by 3.3% y/y.

Banking Sector Liquidity

The overall liquidity position of commercial banks improved during February, increasing by N$727.0 million to reach an average of N$1.50 billion. According to the BoN, the increase was largely due to proceeds from mineral sales during the month.  The outstanding balance of repo’s fell from N$845.7 million to zero by month-end.

Reserves and Money Supply

As per the BoN’s latest money statistics release, broad money supply rose by N$11.4 billion or 10.0% y/y in February. Foreign reserve balances fell by N$2.02 billion to N$32.4 billion in February. The BoN ascribed the decline to the net purchases of South African Rand by commercial banks.

Outlook

Overall, PSCE growth remained extremely muted in February, increasing by only N$3.2 million during the month. Cumulative 12-month private sector credit issuance is down 68.3% from the N$5.76 billion as at the end of February 2020, with individuals taking up most (83.3%) of the credit extended over the past 12 months.

Economic activity remains very low and a lack of demand means that growth opportunities for businesses remain extremely slim. The subdued uptake of credit (or in some cases deleveraging) by businesses, shows that businesses are currently not investing in capital projects, despite the historically low interest rates in the country. While economic growth is expected to pick up marginally this year, economic activity will most likely remain below 2019 levels. Therefore, we do not expect to see a significant recovery in credit extension in the short to medium term.