Category Archives: Economic Research

Economic Research

PSCE – March 2021

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Overall

Private sector credit (PSCE) fell by N$337.6 million or 0.3% m/m in March, bringing the cumulative credit outstanding to N$105.3 billion. On a year-on-year basis, private sector credit grew by 1.55% in March, compared to the 1.76% y/y growth recorded in February. On a rolling 12-month basis, N$1.61 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$544.5 billion was issued to corporates. The non-resident private sector decreased its borrowings by N$455.5 million.

Credit Extension to Individuals

Credit extended to individuals increased by 2.57% y/y in March, on par with February’s increase of 2.58% y/y. On a monthly basis, household credit grew by 0.4% following the increase of 0.6% m/m recorded in February. Mortgage demand by individuals remained relatively strong, increasing by 0.5% m/m and 4.4% y/y. Instalment credit remained depressed, increasing by only 0.2% m/m, but contracting by 3.5% y/y. Overdraft facilities extended to individuals have increased by 0.9% m/m and 1.5% y/y.

Credit Extension to Corporates

Credit extension to corporates contracted for a second consecutive month, declining by 1.1% m/m, following the 0.6% m/m contraction recorded in February. On an annual basis, however, credit extension to corporates recorded low growth of 1.3% y/y in March, compared to the 1.6% y/y growth registered in February. All segments contracted on a monthly basis. Mortgage loans to corporates contracted by 0.1% m/m, other loans and advances (OLA) fell 0.4% and overdrafts declined 3.0% m/m. On a year-on-year basis, mortgage loans contracted 3.6%, while OLA and overdrafts increased 0.6% and 13.0% respectively.

Banking Sector Liquidity

The overall liquidity position of commercial banks improved during February, increasing by N$1.12 billion to reach an average of N$2.60 billion. According to the BoN, liquidity spikes are generally observed in March, as budget execution protocols are accelerated before the close of the fiscal year. Additional inflows of funds were observed at the end of March as pension funds repatriated assets to comply with domestic asset requirements, according to the BoN. The outstanding balance of repo’s varied quite a lot during the month, fluctuating between N$20.1 million and N$868.1 million, before falling to zero at month-end.

Reserves and Money Supply

As per the BoN’s latest money statistics release, broad money supply rose by N$11.1 billion or 9.5% y/y in March. Foreign reserve balances rose by N$2.32 billion to N$34.7 billion in March. The BoN ascribed the increase to the net purchases of foreign currency by the central bank.

Outlook

Overall, PSCE growth remains subdued, decreasing by N$337.6 million in March, causing monthly growth to revert into negative territory for the first time since September 2020. The rolling 12-month private sector credit issuance is down 71.7% from the N$5.68 billion cumulative issuance as at the end of March 2020, with individuals taking up most (94.5%) of the credit extended over the past 12 months.

The low credit appetite reflects the lack of confidence in the Namibian economy, with businesses continuing to delever their balance sheets and banks being more prudent with lending out money. We expect interest rates to remain at their current, historically low, levels. This should continue to provide overindebted consumers and corporates with relief but is unlikely to drive PSCE growth. The dull PSCE statistics reflects the nation’s poor recent economic performance of late, as it reflects both lower consumption spending as well as lower investments by corporates, which are two vital components of GDP. There are very few catalysts for economic growth at present, and as a result we do not expect to see a recovery in credit extension in the short term.

Building Plans – March 2021

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The City of Windhoek approved a total of 228 building plans in March, representing an 3.2% m/m increase from the 221 building plans approved in February. In monetary terms, the approvals were valued at N$158.1 million, a 3.6% m/m increase, while buildings with a value of N$94.3 million were completed during March, a 73.4% m/m increase. Although the number of building approvals for 2021 are 15.4% higher than the same period of 2020, the value of these approvals has fallen relatively sharply by 27.1% y/y, from N$556.7 million in 2020 to N$406.0 million in 2021. Year-to-date, the number of completed buildings rose to 296, a decrease of 13.5% y/y. The value of these completions are down 25.4% y/y from N$276.3 million in 2020 to N$206.3 million in 2021. On a twelve-month cumulative basis, 2,358 buildings with the value of N$1.7 billion were approved, an increase of 15.9% in number, yet a decrease of 13.8% in value, similar to the previous 3 months.  

In terms of number of approvals, additions to properties once again made up the largest portion of approvals, with 63 percent. For the month of March, 143 additions to properties were approved with a value of N$64.2 million, 11 fewer than in March 2020. The value of the additions approved in March is 11.0% higher than those observed in March 2020. 138 additions worth N$36.9 million were completed during the month.

New residential units were the second largest contributor to the total number of building plans approved in March, but the largest contributor in value terms. 81 new units worth N$86.9 million were approved in March, representing a 728.4% increase from the N$10.5 million worth of approvals in March 2020. On a 12-month cumulative basis, residential units recorded a 71.1% y/y increase in value. 68 new residential units worth N$52.0 million were completed during the month.

Four new commercial units, valued at N$7.0 million, were approved in March. This compares to 5 units valued at N$89.1 million approved in March 2020. Year-to-date, there have been eight commercial building approvals valued at N$14.5 million, which translates to a 15.4% increase in number terms and a 27.1% decrease in value terms compared to the same period last year. On a rolling 12-month perspective, the number of commercial and industrial approvals have slowed to 25 units worth N$98.7 million as at March, compared to the 63 approved units worth N$730.2 million over the corresponding period a year ago. Three commercial and industrial units worth N$5.5 million were completed in March.

The 12-month cumulative number of building plans approved increased by 15.9% y/y in March. A total of 2,358 building plans to the value of N$1.70 billion were approved over the last 12 months which represents a decline in value of 13.8% y/y. Additions to properties have made up 64.9% of the cumulative number of approvals, and 40.3% of the total value of approvals. Completed building plans, increased by 5.1% y/y in value terms to N$1.47 billion on a 12-month cumulative basis in March. Although 12-month cumulative value of approvals fell in March, residential building plans seem to have started gaining momentum, recording 10 consecutive months of year-on-year increases in the number of residential approvals, in which 7 of the 10 months recorded increases in value terms. In contrast, the commercial sector reflects Namibia’s uncertain business outlook, with only 8 commercial and industrial building approvals year-to-date. Furthermore, when factoring out commercial and industrial building approvals, the 12-month cumulative value of approvals rose by 28.8% y/y in March. On the one hand, this reflects the relatively strong recent growth witnessed in the residential plans approved, on the other hand, it raises concern about the country’s commercial sector, which made up 38.5% of the value of total approvals at the peak of the construction industry, in September 2013, compared to only 4.4% in March 2021.

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.