Category Archives: Economic Research

Economic Research

NCPI – November 2020

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The Namibian annual inflation rate moderated slightly to 2.2% y/y in November, following the 2.3% y/y increase in prices recorded in October. Prices in the overall NCPI basket increased by 0.1% m/m, as inflationary pressure remains subdued. Overall, prices in five of the twelve basket categories rose at a faster annual rate than in October, while four categories recorded slower rates of inflation and two categories posted steady inflation. Prices for goods increased by 3.3% y/y while prices for services increased by 0.8% y/y.

As it has been the case since April this year, food & non-alcoholic beverages were the largest contributors to annual inflation in November, accounting for 1.2 percentage points of the total 2.2% annual inflation rate. Prices in this category rose 0.3% m/m and 6.9% y/y. Prices in all thirteen sub-categories recorded increases on a year-on-year basis with the largest increases being observed in the prices of fruits which increased by 16.1% y/y and vegetables which increased by 11.5% y/y. Price increases in oils and fats, and meat products quickened to 11.4% y/y and 10.8% y/y respectively.

Alcoholic beverages and tobacco, the third-largest basket item by weighting, was the second-largest contributor to the annual inflation rate in November, contributing 0.6 percentage points to the total 2.2% annual inflation rate.  The basket item recorded a price increase of 0.2% m/m and 4.6% y/y during the month. Prices for alcoholic beverages increased at a rate of 0.1% m/m and 3.6% y/y, while tobacco prices rose by 0.5% m/m and 9.2% y/y.

The education basket, the basket item with the eighth largest weighting (at only 3.6% of the CPI basket), was the third-largest contributor to the annual inflation rate. Primary and secondary education recorded price increases of 9.3% y/y, while tertiary education prices rose by 5.3% y/y. None of the three subcategories printed price increases on a month-on-month basis.

As expected, inflationary pressure in Namibia remains extremely subdued and the Namibian inflation rate continues to trend lower than neighbouring South Africa’s October figure (latest available release) of 3.3%. IJG’s inflation model forecasts an average inflation rate of 2.2% y/y in 2020 and 3.2% y/y in 2021. Global oil prices remain one of the larger risks to our inflation forecast. However, the announcement by the Ministry of Mines and Energy at the beginning of December to cut the petrol and diesel prices by 30 cents and 20 cents per litre respectively, means that the lower transport inflation will likely lead to an even lower inflation print for December. It is also unlikely that we will see lower rental prices in the next 12 months as many consumers remain under financial pressure. With these being the larger categories of the inflation basket, we do not foresee any sudden increases in Namibian inflation in the short-term.

New Vehicle Sales – November 2020

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698 new vehicles were sold in November, representing a 24.9% m/m increase from the 559 vehicles sold in October, but a 20.2% y/y decline from the 875 new vehicles sold in November 2019. Year-to-date 6,913 vehicles have been sold of which 2,881 were passenger vehicles, 3,554 were light commercial vehicles, and 478 were medium and heavy commercial vehicles. On a twelve-month cumulative basis, a total of 7,627 new vehicles were sold as at 30 November, representing a contraction of 26.8% from the 10,417 sold over the comparable period a year ago.

A total of 339 new passenger vehicles were sold during November, an increase of 14.5% m/m, but a decrease of 2.3% y/y. Year-to-date passenger vehicle sales rose to 2,881, down 32.0% compared to the number of new passenger vehicles sold by November last year. On a rolling 12-month basis, passenger vehicle sales are down 29.7% y/y at 3,195 units, the lowest level since April 2004, highlighting the severity of the slowdown in sales.

Commercial vehicles sales reflect a similar picture. 359 New commercial vehicles were sold in November, representing a 36.5% m/m increase, but a year-on-year contraction of 32.0%. 321 light commercial vehicles, 9 medium commercial vehicles, and 29 heavy and extra heavy commercial vehicles were sold during the month. On a twelve-month cumulative basis, light commercial vehicle sales dropped 24.5% y/y, medium commercial vehicle sales fell 29.7% y/y, and heavy commercial vehicle sales contracted by 22.3% y/y, with all measures remaining on a downward trajectory on an annual basis.

Toyota remains the leader in terms of year-to-date market share of new passenger vehicles sold with 28.9% of the market, followed closely by Volkswagen with 25.6%. The two top brands maintained their large gap over the rest of the market with Kia and Hyundai following with 6.7% and 5.8% of the market respectively. The only other manufacturer that managed to breach the 5% market share mark was Mercedes-Benz with 5.2% of the market leaving the remaining 27.7% of the market to other brands.

Toyota also remains the leader in the light commercial vehicle space with a dominant 55.9% market share. Nissan and Ford were the only other manufacturers to breach the 10% market share level with 12.7% and 12.2% of the market respectively. Mercedes leads the medium commercial vehicle segment with 32.1% of the market. Scania remained number one in the competitive heavy and extra-heavy commercial vehicle segment with 22.6% of the market share year-to-date, followed closely by Volvo Trucks and Mercedes with 21.3% and 17.9% of the market respectively.

The Bottom Line

Black Friday specials and the recent introduction of 72-month vehicle loans could likely have been the cause for the month-on-month uptick in new vehicle sales in November, however the general trend in new vehicle sales remains negative as every sector recorded lower sales than during the same month last year. The fact that the 12-month cumulative figure is hovering around levels last seen in 2005 is a consequence of the recessionary environment we find ourselves in. Eroded consumer and business confidence, coupled with government’s commitment to fiscal consolidation as well as a halt in foreign direct investment brought on by poor policy guidance means that domestic economic growth (and by extension new vehicle sales) are expected to remain muted for the foreseeable future.

PSCE – October 2020

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Overall

Total credit extended to the private sector (PSCE) increased by N$71.6 million or 0.1% m/m in October, bringing the cumulative credit outstanding to N$102.95 billion. On a year-on-year basis, private sector credit extension increased by only 1.0% y/y in October, compared to 1.5% growth recorded in September. This represents the lowest level of annual growth on our records dating back to 2002 as issuance continues to slow. N$2.39 billion worth of credit has been extended to individuals on a 12-month cumulative basis, while corporates and the non-resident private sector decreased their borrowings by N$975.0 million and N$369.4 million, respectively.

Credit Extension to Individuals

Credit extended to individuals increased by 0.7% m/m and 4.2% y/y in October. The month-on-month growth has mostly been driven by an increase in ‘other loans and advances’ (or OLA, which is made up of credit card debt, personal and term loans) which grew by 1.1% m/m and 11.0% y/y in October. Overdrafts grew by 1.1% m/m and 3.6% y/y indicating continued use of short-term credit by individuals. On the other hand, longer-term credit agreements like mortgages and instalment credit continued to slow. Mortgages declined by 0.8% m/m and increased by only 4.3% y/y as housing purchases continue to slow in value terms. Instalment credit grew by 0.1% m/m but was down 5.3% y/y as new vehicle sales continue to dwindle, declining 27.3% y/y.

Credit Extension to Corporates

Credit extended to corporates contracted by 0.8% m/m and 2.2% y/y in October, following similar contractions in September. Except for the OLA category, all other segments contracted on a monthly basis. Mortgage loans to corporates declined by 0.8% m/m and 7.8% y/y. Instalment credit extended to corporates, which has been contracting since February 2017 on an annual basis, remained depressed, contracting by 1.5% m/m and 16.7% y/y in October the lowest level since early 2019. Overdrafts to corporates declined by 2.6% m/m but increased by 3.6% y/y.

Banking Sector Liquidity

The overall liquidity position of commercial banks improved significantly in October, increasing by N$889.4 million to an average of N$3.10 billion during the month. According to the Bank of Namibia, the increase in liquidity is on the back of diamond sales, increased government expenditure and interest payment from the state during the period under review. Due to the increase in liquidity, The outstanding balance of repo’s fell from N$116.0 million to zero by month-end.

Reserves and Money Supply

Broad money supply rose by N$13.4 billion or 11.7% y/y in October, as per the BoN’s latest monetary statistics release. Foreign reserve balances increased by N$1.69 billion or 5.2% m/m to N$34.4 billion in September. The BoN attributes the rise in the official reserve stock to SACU inflows during the period under review.

Outlook

Private sector credit extension growth remains subdued at the end of October, slowing from 1.5% y/y to 1.0% y/y in October. Rolling 12-month issuance fell to N$1.04 billion and is down a rather staggering 82.3% from the N$5.89 billion figure as at October 2019. Although Namibian interest rates are at historical lows, so are business and consumer confidence. Economic activity, which was slow before the pandemic, has been hit hard by global lowdowns, and recovery may take years to materialise. As a result, credit uptake remains weak, as the base of growth, individual mortgages, continues to slow. Additionally, corporates continue to repay debt and de-lever their balance sheets. If these trends continue, we are likely to see private sector credit extension contract on an annual basis in the coming months.