Category Archives: Economic Research

Economic Research

PSCE – November 2020

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Overall

Private sector credit (PSCE) increased by N$1.09 billion or 1.05% m/m in November, bringing the cumulative credit outstanding to N$104.68 billion. On a year-on-year basis, private sector credit increased by 2.31% in November, compared to 1.65% y/y in October. On a rolling 12-month basis, N$2.37 billion worth of credit was extended to the private sector. Of this cumulative issuance, individuals took up N$2.38 billion while corporates took up N$321.6 million. The non-resident private sector decreased their borrowings by N$337.8 million.

Credit Extension to Individuals

Credit extended to individuals increased by 0.7% m/m and 4.1% y/y in November, growing at a slightly slower pace than the 4.2% y/y increase recorded in October. The month-on-month growth has mostly been driven by an increase in overdrafts which grew by 5.8% m/m and 9.4% y/y indicating continued use of short-term credit by individuals. The uptake of longer-term credit agreements like mortgages and instalment credit by individuals continued to slow. The value of mortgage loans extended to individuals rose by only 0.4% m/m and 4.4% y/y. Instalment credit grew by 0.4% m/m but was down 4.1% y/y as new vehicle sales continue to dwindle.

Credit Extension to Corporates

Credit extended to corporates grew by 1.5% m/m after increasing by 0.7% m/m in October. On an annual basis, credit extended to corporates rose by a mere 0.7% y/y. As was the case with credit extension to individuals, the month-on-month growth in corporate credit was primarily driven by increased uptake in overdraft facilities which registered growth of 7.7% m/m and 15.0% y/y. The Bank of Namibia (BoN) attributed this to a rise in demand for overdrafts by businesses operating in the wholesale and retail trade sector as well as the agriculture sector. Mortgage loans to corporates increased by 0.8% m/m but declined by 7.2% y/y. Instalment credit extended to corporates, which has been contracting since February 2017 on an annual basis, remained depressed, contracting by 1.2% m/m and 17.2% y/y in November, the lowest level since early 2019.

Banking Sector Liquidity

The overall liquidity position of commercial banks deteriorated during November, contracting by N$764.5 million to reach an average of N$2.34 billion during the month. According to the BoN, the decline can mainly be attributed to cross-border transfers, funds mainly designated for investments.

Reserves and Money Supply

As per the BoN’s latest money statistics release, broad money supply rose by N$9.90 billion or 8.5% y/y in November. Foreign reserve balances fell by N$3.84 billion or 11.2% m/m to N$30.52 billion in November. The BoN ascribes the decline to net government payments, foreign currency purchases by commercial banks and exchange rate revaluations during the period.

Outlook

Private sector credit extension growth remained subdued at the end of November. While 12-month cumulative issuance rose to N$2.37 billion in November from N$1.68 billion in October, 12-month issuance is still down 57.3% y/y. With economic conditions unlikely to improve materially in 2021, we expect the trend of reliance on short-term debt by both consumers and businesses to continue. With corporates continuing to repay their longer-term debt and de-levering their balance sheets, we are unlikely to see meaningful growth in private sector credit extension and could even see a contraction on an annual basis in the coming months.

Building Plans – November 2020

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The City of Windhoek approved a total of 271 building plans worth N$237.2 million in November, 35 fewer than in October. In value terms, approvals fell by N$90.5 million to N$237.2 million in November from N$327.7 million worth of approvals in October. A total of 61 building plans worth N$40.4 million were completed during the month, a decline of 76.3% y/y in number and 82.8% y/y in value of completions. Year-to-date, N$1.78 billion worth of building plans have been approved, 2.7% lower than the corresponding period in 2019. On a twelve-month cumulative basis, 2,258 building plans have been approved worth approximately N$1.94 billion, 2.8% higher in value terms than approvals at the end of November 2019.

The largest portion of building plan approvals in November was made up of additions to properties. 165 additions to properties were approved with a value of N$95.1 million, 11.3% lower in number, but 42.4% more in value terms than in October. Year-to-date 1,517 additions to properties have been approved with a total value of N$673.5 million, a 3.1% y/y decline in number and 9.3% y/y decrease in value. 10 additions worth N$5.5 million were completed during the month. Year-to-date 866 additions have been completed with a combined value of N$444.8 million, down 31.2% y/y in number and 34.8% y/y in value terms.

New residential units accounted for 104 of the total 271 approvals registered in November, an 9.6% m/m decrease compared to the 115 residential units approved in October. In value terms, N$132.0 million worth of residential units were approved during the month, 45.6% less than the N$242.9 million worth of residential approvals in October. Year-to-date 610 residential units have been approved worth N$798.2 million, 278 units more than in the corresponding period in 2019 and up N$280.4 million in value terms. 51 Residential units valued at N$34.9 million were completed in November, bringing the year-to-date number to 690, up 147.3% y/y. In monetary terms, this is an increase of 170.4% y/y.

Only 2 new commercial units, valued at N$10.0 million, were approved in November, bringing the year-to-date number of approvals to 40, worth a total of N$305.0 million. On a rolling 12-month perspective, the number of commercial and industrial approvals have slowed to 43 units worth N$315.6 million as at November, compared to the 47 approved units worth N$566.1 million over the corresponding period a year ago. No commercial and industrial units were completed in November.

On a rolling 12-month basis, the number of building plan approvals have been ticking up steadily since June, although the growth has been from a relatively low base. In monetary terms, these approvals are up only 2.8% y/y. Additions to properties have made up 70.0% of the year-to-date total number of approvals, but only 37.9% of the total value of approvals, 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.

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.