Category Archives: Economic Research

Economic Research

Building Plans – October 2020

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A total of 306 building plans were approved by the City of Windhoek in October, 72 more than in September. In value terms, approvals rose by N$194.1 million to N$327.7 million in October from N$133.6 million worth of approvals in September. A total of 65 building plans were completed at a value of N$54.8 million in October, a decrease of 73.4% y/y in number and 50.1% y/y in value of completions. Year-to-date, N$1.54 billion worth of building plans have been approved, 9.6% lower than the comparative period a year ago. On a twelve-month cumulative basis, 2,173 building plans were approved worth approximately N$1.83 billion, 1.2% higher in value terms than approvals at the end of October 2019.

The largest number of building plan approvals in October was made up of additions to properties. 186 additions to properties were approved with a value of N$67.0 million, 25.7% higher in number and 15.5% more in value terms than in September. Year-to-date 1,352 additions to properties have been approved with a total value of N$578.4 million, a 3.4% decline in number and 11.9% y/y decrease in value. 17 additions worth N$15.1 million were completed during the month. Year-to-date 856 additions have been completed with a combined value of N$439.3 million, down 16.7% y/y in number and 8.0% y/y in value terms.

New residential units were the second largest contributor to the number of building plans approved with 115 approvals registered in October, 30 more than in September. In value terms, N$242.9 million worth of residential units were approved in October, an increase of 35.3% m/m and 224.9% y/y. Year-to-date 506 new residential units have been approved worth N$666.2 million, an increase of 60.1% and 36.0% compared to the same time last year. 47 Residential units valued at N$39.3 million were completed in October bringing the year-to-date number to 639, up 151.6% y/y. In value terms this is an increase of 183.0% y/y to N$992.5 million.

5 New commercial units, valued at N$18.0 million, were approved in October, bringing the year-to-date number of commercial and industrial approvals to 38, worth a total of N$295.0 million. Bar one month, the number of approvals for commercial and industrial properties has been languishing in single-digit territory since September 2016 and has an average approval rate of fewer than 4 approvals per month over the last 12 months. On a rolling 12-month basis, the number of commercial and industrial approvals increased to 46 units, worth approximately N$314.8 million, a decrease of 43.6% in value terms from the period ending October 2019. One commercial building plan was recorded as completed in October, valued at N$400,000.

During the last 12 months, 2,173 building plans have been approved, increasing by 11.6% y/y. These approvals were worth a combined N$1.83 billion, an increase in value of 1.2% y/y. The last 3 months have seen a steady uptick in the 12-month cumulative number of plans approved in the capital, but the growth in the cumulative value of plans approved have been lagging, for the most part, indicating that the planned construction activity will mostly consist of smaller building projects. The cumulative value of plans approved is still trending downward from a longer-term perspective, as the graph above indicates.

The value of plans completed has however recovered more significantly as can be seen in the below figure, although as we have cautioned in the past, this could simply be due to a completions backlog (paperwork backlog) which is now being processed by the City of Windhoek, making it difficult to say when the actual construction activity took place.

NCPI – October 2020

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The Namibian annual inflation rate remained relatively steady at 2.3% y/y in October, following the 2.4% y/y uptick in prices in September. Prices in the overall NCPI basket increased by 0.1% m/m, as inflationary pressure remains muted. On a year-on-year basis, overall prices in six of the twelve basket categories rose at a quicker rate in October than in September, 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 rose by 0.9% y/y.

As in September, food & non-alcoholic beverages were the largest contributors to annual inflation in October, accounting for 1.3 percentage points of the total 2.3% annual inflation rate. Prices in this category rose 0.7% m/m and 7.1% y/y, the highest level since March 2017. 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 14.1% y/y. Price increases in meat products and fish also remained elevated at 9.3% y/y and 8.5% y/y respectively. The prospects for the Southern African region to receive normal to above-normal rainfall for the 2020-21 cropping season are currently high as La Niña conditions is expected to be sustained until at least February 2021. Should this materialise, food inflation should slow down.

The alcoholic beverages and tobacco basket item was the second largest contributor to the annual inflation rate in October. The basket item recorded a price increase of 1.4% m/m and 4.3% y/y during the month. Prices for alcoholic beverages increased at a rate of 1.0% m/m and 3.4% y/y, while tobacco prices rose by 3.2% m/m and 8.4% y/y.

The education basket recorded inflation of 7.0% y/y, with the cost of pre-primary education growing at a rate of 5.6%. 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. The fact that the basket item with the eighth largest weighting (at 3.6% of the CPI basket) is one of the largest contributors of the annual inflation rate is an indication of just how low inflationary pressure is at the moment.

We believe that inflationary pressure will remain relatively contained at around current levels in the short-term. IJG’s inflation model forecasts an average inflation rate of 2.2% y/y in 2020 and 3.4% y/y in 2021. One of the larger risks to our inflation forecast is global oil prices. While there has been an uptick in oil prices in recent weeks, it is improbable that it would return to levels seen at the beginning of the year anytime soon as the global demand for oil remains muted, especially since several European countries are implementing renewed lockdown measures. The likelihood of higher rental prices in the next 12 months also remains low, given the financial pressure many consumers are under. 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 – October 2020

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A total of 559 new vehicles were sold in October, representing a 36.1% m/m decline from the 875 vehicles sold in September, and a 42.4% y/y contraction from the 971 new vehicles sold in October 2019. Year-to-date 6,215 vehicles have been sold of which 2,542 were passenger vehicles, 3,233 were light commercial vehicles, and 440 were medium and heavy commercial vehicles. On an annual basis, twelve-month cumulative basis, new vehicle sales continued its downward trend with 7,804 new vehicles sold over the last twelve months, a 27.3% y/y contraction from the corresponding period last year, and the lowest since March 2005.

296 new passenger vehicles were sold in October, an increase of 6.1% m/m, but contracting by 16.6% y/y. Year-to-date passenger vehicle sales rose to 2,542 units, down 34.6% when compared to the year-to-date figure recorded in October 2019. Twelve-month cumulative passenger vehicle sales fell 30.4% y/y as the number of passenger vehicles sold continued to decline. On a rolling 12-month basis, passenger vehicle sales are at their lowest level since April 2004 at 3,203 units, highlighting the severity of the slowdown in sales.

Following the strong uptick in commercial vehicle sales in September when 596 units were sold, new commercial vehicle sales fell to 263 in October, contracting by 55.9% m/m and 57.3% y/y. Of the 263 commercial vehicles sold, 217 were classified as light commercial vehicles, 18 as medium commercial vehicles, and 28 as heavy and extra heavy commercial vehicles. On a twelve-month cumulative basis, light commercial vehicle sales dropped 25.3% y/y, medium commercial vehicle sales fell 19.7% y/y, and heavy commercial vehicle sales contracted by 24.7% y/y, with all measures remaining on a downward trajectory on an annual basis.

Toyota leads the passenger vehicle sales segment with 28.4% of the segment sales year-to-date, followed closely by Volkswagen with 26.1% of the market share. The two top brands maintained their large gap over the rest of the market with Kia and Hyundai following with 6.7% and 5.9% of the market respectively, leaving the remaining 32.8% of the market to other brands.

Toyota retains a strong year-to-date market share of 56.5% and remains the market leader in the light commercial vehicle segment. Nissan remains in the second position in the segment with 12.6% of the market, while Ford makes up third place with 11.6% of the year-to-date sales. Mercedes leads the medium commercial vehicle segment with 30.7% of the market. Scania remained number one in the competitive heavy and extra-heavy commercial vehicle segment with 22.8% of the market share year-to-date, closely followed by Volvo Trucks and Mercedes with 19.7% and 17.6% of the market respectively.

The Bottom Line

Following the relatively strong vehicle sales recorded in September, new vehicle sales reverted to the levels seen in prior months. The month of October has historically been one of the stronger months regarding new vehicle sales, but October 2020’s sales of 559 units lagged the average number of vehicles sold during the month by 682 vehicles. A slowdown in government spending in real terms, coupled with a halt in foreign direct investment brought on by poor policy guidance has resulted in a stagnant economy and as a result erosion of consumer and business confidence. This stagnation has been further intensified by strict lockdown measures aimed at slowing the spread of Covid-19.

While it is still early days, it does seem like the recently introduced 72-month vehicle loans have had a small positive impact on new passenger vehicle sales after two consecutive months of growth in this segment, albeit off a low base. However, as it is unlikely that economic conditions will improve significantly in the short- to medium-term, we expect the demand for new vehicles to remain low.