Category Archives: Economic Research

Economic Research

NCPI – January 2021

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The Namibian annual inflation rate ticked up to 2.7% y/y in January, following the 2.4% y/y increase in prices recorded in December. Prices in the overall NCPI basket increased by 0.9% m/m. On a year-on-year basis, overall prices in nine of the twelve basket categories rose at a quicker rate in January than in December, while the other three recorded slower rates of inflation. Prices for goods increased by 3.2% y/y while prices for services increased by 2.0% y/y.

Food & non-alcoholic beverages, the second largest basket item in weighting, accounted for 0.9 percentage points of the total inflation figure. Food and non-alcoholic beverage prices increased by 5.2% y/y, moderating from the 7.6% y/y recorded in December. Prices in twelve of the thirteen sub-categories recorded increases on an annual basis. The largest increases were observed in the prices of fruits which increased by 13.6% y/y and vegetables which increased by 12.4% y/y. The fish sub-category meanwhile saw a marginal price decrease of 0.3% y/y in January.

Alcoholic beverages and tobacco prices, making up approximately 12.6% of the overall inflation basket, was the second highest contributor to the annual inflation rate in January, with prices of the basket item increasing by 0.8% m/m and 5.0% y/y. The main driver in this basket category was tobacco prices which increased by 10.3% y/y while alcohol prices rose by 3.8% y/y.

The miscellaneous goods & services basket recorded inflation of 6.7% m/m and 6.5% y/y, and contributed 0.35 percentage points to the overall annual inflation figure. The financial services sub-category recorded a rather hefty price increase of 27.2% m/m and 24.0% y/y. The four other subcategories (personal care, personal effects, insurance and other services) all recorded quicker inflation on a month-on-month basis but recorded slower inflation on a year-on-year basis.

Despite the second consecutive uptick, the Namibian annual inflation rate continues to trend lower than that of neighbouring South Africa’s inflation rate. According to the NSA, the prices for the rental payments for dwellings sub-category rose by only 0.6% y/y in January. As rental payments make up a large portion (23.3%) of the CPI basket, the low inflationary adjustment means that Namibian annual inflation in 2021 is likely to remain well below Namibia’s long-run average. IJG’s inflation model forecasts an average inflation rate of 2.9% y/y in 2021 and 4.3% in 2022, indicating a steady increase in the inflation rate over the next two years. We remain of the view that the largest upside risk to this forecast is higher food costs and fuel prices.

Building Plans – January 2021

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A total of 122 building plans were approved by the City of Windhoek in January, representing a 6.1% m/m increase from the 115 building plans approved in December. In monetary terms, the approvals were valued at N$84.0 million, an 11.5% m/m increase,  while buildings with a value of N$57.6 million were completed during January, a 79.9% m/m increase. 2021 is off to a slower start in terms of value of approvals, compared to January 2020 when 121 building plans worth N$189.4 million got the nod. On a twelve-month cumulative basis, 2,283 building plans worth approximately N$1.75 billion were approved, an increase in number of 14.7% y/y, but a decline of 8.5% y/y in value terms over the prior 12-month period.

In terms of number of approvals, additions to properties made up the largest portion of approvals. For the month of January, 71 additions to properties were approved with a value of N$25.7 million, 7 more than the number of additions approved in January 2020. The value of the additions approved in January is however 55.6% lower than those observed in the first month of 2020. 4 additions worth N$890,000 were completed during the month.

New residential units were the second largest contributor to the total number of building plans approved in January. 50 new units worth N$51.3 million were approved in January, representing a 102.9% increase from the N$51.3 million worth of approvals in the first month of 2020. On a 12-month cumulative basis, residential units recorded a 74.6% y/y increase in value. 30 new residential units worth N$57.6 million were completed during the month.

Only 1 new commercial unit, valued at N$7.0 million, was approved in January. This compares to 6 units valued at N$136.0 million approved in January 2020. On average over the last 20 years, 4 commercial units valued at N$26.5 million were approved in the first month of the year. On a rolling 12-month perspective, the number of commercial and industrial approvals have slowed to 36 units worth N$202.2 million as at January, compared to the 51 approved units worth N$641.6 million over the corresponding period a year ago. No commercial and industrial units were completed in January.

The 12-month cumulative number of building plans approved increased by 14.7% y/y in January. A total of 2,283 building plans to the value of N$1.75 billion were approved over the last 12 months which represents a decline in value terms of 8.5% y/y. Additions to properties have made up 68.9% of the cumulative number of approvals, but only 39.4% of the total value of approvals, indicating that the planned construction activity will mostly consist of smaller building projects. The low single digit number of commercial approvals witnessed over the last 11 months indicates that most businesses are not planning on expanding their existing operations. It is evident that the Namibian construction industry continues to tread water as the value of approvals continues to decline in real terms.

New Vehicle Sales – January 2021

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A total of 694 new vehicles were sold in January, which is 6 cars fewer than were sold in December, but represents a 3.3% y/y increase from the 672 new vehicles sold in January 2020. On a twelve-month cumulative basis, a total of 7,636 new vehicles were sold up to the end of January 2021, representing a contraction of 26.5% from the 10,395 new vehicles sold over the same 12 month period a year ago. 2021 is thus off to a slightly better start than January 2020, however, new vehicle sales remain sluggish.

355 new passenger vehicles were sold during January, an increase of 7.6% m/m from the 330 passenger vehicles sold in December, and 21.6% higher y/y from the 292 new passenger vehicles sold in January 2020. On a rolling 12-month basis, new passenger vehicle sales rose 2.0% m/m, but are down 27.2% y/y at the end of January. 12-month cumulative passenger vehicle sales were down 66.7% from the peak in April 2015.

Commercial vehicle sales declined to 339 units in January, representing a contraction of 8.4% m/m and 10.8% y/y. During the month 301 light commercial vehicles, 9 medium commercial vehicles, and 29 heavy commercial vehicles were sold. On a year-on-year basis, light commercial sales fell by 10.1% y/y, medium commercial vehicle dropped by 35.7% y/y, and heavy and extra heavy vehicle sales declined by 6.5% y/y. On a twelve-month cumulative basis, light commercial vehicle sales contracted by 25.3% y/y, medium commercial vehicles declined by 37.2% y/y and heavy commercial vehicle sales fell by 27.3% y/y.

Volkswagen started the year off on a strong foot with a 41.4% market share of new passenger vehicles sold, followed by Toyota with a 25.1% market share. They were followed by Kia and Mercedes who each had a 6.5% market share, while the rest of the passenger vehicle market was shared by several other competitors.

Toyota meanwhile started the year off with a solid grip on the light commercial vehicle market with a 55.1% market share, with Nissan in second place with a 13.3% market share. Ford and Volkswagen claimed 11.3% and 5.0% of the number of new light commercial vehicles sold during the month, respectively. Iveco led the medium commercial vehicle category with 33.3% of sales, while Scania was number one in the heavy and extra-heavy commercial vehicle segment with 27.6% of the market share during the month.

The Bottom Line

New passenger vehicle sales started the year off stronger than in 2020, with passenger vehicle sales increasing by 21.6% y/y. This uptick in sales did not pass through to commercial vehicle sales which had a poor start and contracted by 10.8% y/y. While new vehicle sales in January were higher than the first month of the past two years, it remains considerably lower than the numbers recorded between 2012 and 2016. The likelihood of a recovery in 2021 to the levels witnessed during that period seems very low currently. We expect businesses to hold on to their current fleets for as long as possible and for consumers to mostly stick to the pre-owned market, seeing that there are very few economic growth prospects at present.