Category Archives: Economic Research

Economic Research

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.

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.