Category Archives: Economic Research

Economic Research

PSCE – December 2020

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Overall

Private sector credit (PSCE) increased by N$277.2 million or 0.3% m/m in December, bringing the cumulative credit outstanding to N$105.4 billion. On a year-on-year basis, private sector credit increased by 1.6% in December, compared to 2.7% in November. On a rolling 12-month basis, N$1.64 billion worth of credit was extended to the private sector. Compared to the previous year, the rolling 12-month issuance is down 75.5% from the N$6.71 billion issuance observed by the end of December 2019. Of this cumulative issuance, individuals took up N$2.60 billion, while corporates reduced their borrowings by N$546.0 million and the non-resident private sector repaid N$414.7 million of their borrowings.

Credit Extension to Individuals

Credit extended to individuals increased by 0.5% m/m and 4.5% y/y in December, growing at a slightly quicker pace than the 4.2% y/y increase recorded in November. The month-on-month growth mostly stemmed from instalment credit which grew by 1.4% m/m. Instalment credit, however, remains down on an annual basis, falling by 2.6% y/y in December, although at a slower rate than in the prior 11 months. The value of mortgage loans extended to individuals rose by 0.5% m/m and 5.2% y/y. Overdrafts to individuals fell by 0.2% m/m, but increased by 8.6% m/m, following the strong increase of 5.6% m/m and 9.1% y/y in November.

Credit Extension to Corporates

Credit extended to corporates grew by 0.2% m/m after increasing by 2.4% m/m in November. On an annual basis, credit extended to corporates contracted by 1.2% y/y. Overdrafts to corporates showed the strongest monthly increase, registering growth of 1.0% m/m and 12.6% y/y. Demand for instalment credit by corporates remained low, increasing by 0.3% m/m, but contracting by 15.8% y/y. Mortgage loans to corporates, which has been contracting on an annual basis since April 2020, remained depressed, contracting by 0.1% m/m and 8.7% y/y in December.

Banking Sector Liquidity

The overall liquidity position of commercial banks deteriorated significantly during December, declining by N$1.09 billion to reach an average of N$1.25 billion. The Bank of Namibia ascribed the decline to periodic corporate tax payments to the government during December. The relatively low liquidity position has prompted commercial banks to utilize the BoN’s repo facility, with the balance of repo’s outstanding increasing from N$0 at the start of December to N$1.04 billion at the end of the month.

Reserves and Money Supply

Broad money supply rose by N$12.2 billion or 7.4% y/y in December, as per the BoN’s latest monetary statistics release. Foreign reserve balances rose by N$1.23 billion or 4.0% m/m to N$31.75 billion in December. According to the BoN, the increase is due to net inflows of rand currency from commercial banks during the month.

Outlook

Overall, private sector credit growth remained depressed in 2020, slowing from the roughly 6% y/y growth observed at the beginning of the year to the 1-2% range at the end of the year. The slowdown in growth was especially evident from May onwards, as corporates started repaying their debt. What is also evident from the data is that mortgage demand by individuals was relatively strong compared to corporate demand for mortgages, with the average annual growth rate for individuals registered at 5.4% compared to the average corporate growth rate of -4.9% in this category. Corporate demand for instalment and leasing credit contracted sharply during the year, indicating that corporates are hanging on to their existing fleet and machinery. This is to be expected in the current economic climate where the is little reason for businesses to expand their current operations as no significant improvement in economic growth is expected.

New Vehicle Sales – December 2020

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700 New vehicles were sold in December, 1 more than the upward revised 699 in November, but a 2.0% y/y decrease from the 714 new vehicles sold in December 2019. Year-to-date 7,614 vehicles have been sold, a 26.8% contraction from December last year and the lowest annual vehicle sales figure since 2004. Of the 7,614 new vehicles sold during the year, 3,212 were passenger vehicles, 3,869 were light commercial vehicles, and 533 were medium and heavy commercial vehicles.

A total of 330 new passenger vehicles were sold during December, representing a 2.9% m/m contraction, but a 5.1% y/y increase. 3,212 passenger vehicles were sold in 2020, a 29.4% decline from 2019 and lower annual sales than the preceding 16 years. Passenger vehicle sales made up 42.2% of the total number of new vehicles sold during 2020 broadly in line with the trend over the last 6 years.

370 new commercial vehicles were sold in December, an increase of 3.1% m/m, but a 7.5% y/y contraction. During the month 315 light commercial vehicles, 13 medium commercial vehicles, and 42 heavy commercial vehicles were sold. On a year-on-year basis, light commercial sales have declined by 6.0%, medium commercial vehicles fell 38.1% and heavy and extra heavy vehicles sales contracted 4.5%. On a twelve-month cumulative basis, light commercial vehicle sales dropped 24.2% y/y, medium commercial vehicle sales fell 35.3% y/y and heavy commercial vehicle sales contracted by 25.4%.

Toyota lead the market for new passenger vehicle sales in 2020, claiming 28.6% of the market, followed by Volkswagen with a 25.5% share. They were followed by Kia and Hyundai at 6.8% and 5.8%, respectively. The only other manufacturer that managed to breach the 5% market share mark was Mercedes-Benz with 5.3% of the market, leaving the remaining 27.9% of the market to other brands.

Toyota also remained the leader in the light commercial vehicle space in 2020 with 56.0% market share, with Nissan in second place with a 12.9% market share. Ford and Isuzu claimed 12.3% and 6.7% respectively of the number of new light commercial vehicles sold for the year. Mercedes lead the medium commercial category with 32.0% of sales while Volvo Trucks was number one in the heavy and extra-heavy commercial vehicle segment with 21.6% of the market share during the year.

The Bottom Line

2020 was a dismal year for vehicle sales. The cumulative number of new vehicle sales for the year amounted to 7,614, a decline of 26.8% from the cumulative number of vehicles sold in 2019 and a 66.4% contraction from the peak of 22,664 new vehicle sales recorded in April 2015 on a cumulative 12-month basis. The year-to-date sales graph at the top of this report shows how severely the new vehicle industry was impacted by the lockdown in April. The recovery since then has been slow and overall new vehicle sales have still not returned to the already low levels of 2019. The introduction of the longer-dated 72-month vehicle loans has had a small positive impact on new passenger vehicle sales, but not enough to offset the damage done by lockdowns. With there being few signs that 2021 will see significant economic growth, we expect new vehicle sales to remain under pressure.

Building Plans – December 2020

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A total of 115 building plans were approved by the City of Windhoek in December, which is a 57.6% m/m decline from the 271 building plans approved in November. In value terms, approvals fell by 68.2% m/m to register N$75.4 million worth of approvals in December, compared to N$237.2 million in November. A total of 51 building plans worth N$32.0 million were completed during the month, representing an increase of 13.3% y/y in number, but a decline of 12.0% in value of completions. A total of 2,282 building plans were approved in 2020, 250 more than in 2019. However, in value terms approvals fell by 7.0% in 2020, declining from N$1.99 billion in 2019 to N$1.85 billion in 2020.

Additions to properties once again made up the majority of building plans approved in 2020. Of the 2,282 building plans approved in 2020, additions accounted for 1,601 of these approvals, 29 fewer than in 2019. In value terms, approvals of additions for the year declined by N$78.3 million or 10.1% y/y. The value of additions approved has been contracting for the past five years, with a decline of 10.1% recorded in 2020 following the 16.3% contraction in 2019. 84 additions were approved in December, 81 fewer than in November and 74.9% lower in value terms at N$23.9 million. During the year, 886 additions have been completed to a value of N$454.1 million, a drop of 30.5% y/y in number and 34.1% y/y in value terms.

New residential units were the second largest contributor to the total number of building plans approved with 640 approvals registered in 2020, 285 more than in 2019. In value terms, new residential units approved increased from N$640.8 million in 2019 to N$823.5 million in 2020. On a month-on-month basis, the number of new residential approvals decreased by 71.2% to 30 in December, while the value of approvals declined by 80.9% to N$25.3 million. 30 Residential units valued at N$16.8 million were completed in December, bringing 2020’s total number to 720, up 133.8% y/y, and value to N$1.04 billion, up 155.0% y/y.

A total of 41 commercial and industrial units were approved in 2020 compared to the 47 approved in 2019. In value terms, commercial and industrial approvals fell by N$244.5 million or 42.5% for the year in 2020 from the N$575.6 million reported in 2019. In December, only 1 new commercial unit valued at N$26.2 million was approved, 1 fewer than in November, but a 162.2% m/m increase in terms of value. 1 Commercial and industrial building was completed in December, bringing the year’s total to 12, a 58.6% decline from 2019. In value terms, N$39.7 million worth of commercial and industrial units were completed in 2020, representing a contraction of 78.6% y/y.

The number of building plans approved in 2020 rose by 12.3% compared to 2019, but the cumulative number of plans remains down 32.9% from its peak in 2013. The cumulative value of approvals fell 7.0% y/y to N$1.85 billion in 2020 and is down 29.0% from the peak in 2013 in nominal terms. Building plans approved is a leading indicator of economic activity in the country and the above data implies that the Namibian economy is still showing signs of hardship. The significantly lower commercial building plan approvals in 2020 is another sign of this and indicate that most businesses are not planning on expanding their existing operations.