Category Archives: Economic Research

Economic Research

Building Plans – September 2020

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The City of Windhoek approved a total of 234 building plans worth N$133.6 million in September. In value terms approvals rose by 19.3% m/m but fell by 69.1% y/y. A total of 74 completions to the value of N$115.4 million were recorded in September, a decrease of 67.1% y/y in number but a 5.0% y/y increase in value. The year-to-date value of approved building plans reached N$1.21 billion, 22.7% lower than the comparative period a year ago. On a twelve-month cumulative basis, 2,081 building plans were approved worth approximately N$1.64 billion, 10.5% lower in value terms than approvals at the end of September 2019.

The majority of building plan approvals were made up of additions to properties. For the month of September 148 additions were approved worth N$57.8 million, 6.3% less in number and 9.6% less in value than in August. Year-to-date, 1,166 additions have been approved with a value of N$511.6 million, a 4.5% y/y decrease in number and 11.7% y/y decrease in value. 38 additions worth N$18.5 million were completed during the month. In 2020 thus far 839 additions have been completed worth N$424.2 million, an increase of 3.2% y/y in number and 7.4% y/y in value.

New residential units accounted for 85 of the total 234 approvals registered in September, worth N$74.8 million. Year-to-date 391 new residential units have been approved worth N$423.3 million, an increase of 37.2% y/y in number but a decrease of 4.2% y/y in value. 35 new residential units worth N$95.9 million were completed during the month, increases of 84.2% y/y in number and 294.1% y/y in value. Year-to-date 592 residential units have been completed at a value of N$953.2 million, increasing by 163.1% y/y in number and 194.9% y/y in value. On a 12-month cumulative basis the number and value of residential completions are at the highest levels since 2005.   

Only 1 new commercial unit, valued at N$1.0 million, was approved in September, bringing the year-to-date number of commercial and industrial approvals to 33, worth a total of N$277.0 million. On a rolling 12-month basis, the number of commercial and industrial approvals have slowed further to 45 worth N$306.4 million as at September, representing an increase of 2.3% y/y in number and a decrease of 45.0% y/y in value.

As illustrated in the figure above, the cumulative value of building plans approved continues to trend downward in both nominal and inflation adjusted terms. As approvals is a forward-looking measure of expected construction activity this does not bode well for economic activity in the capital in general. What may be positive however is the ratio of completions to lagged approvals seems to indicate a higher proportion of approved building plans actually being completed. This may partly explain why the approvals data failed to predict the below visible increase in completions. Another possible explanation is that there has been a completions backlog (paperwork backlog) which is now being processed, in which case the below graph does not tell us much about when the actual construction activity took place. We thus caution reading too much into the completions data and continue to look at approvals as a leading economic indicator. 

 

New Vehicle Sales – September 2020

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874 New vehicles were sold in September, an increase of 46.9% m/m from the 595 vehicles sold in August, and an 8.4% y/y increase from the 806 new vehicles sold in September 2019. September is only the second month this year where new vehicle sales topped sales in 2019 on a year-on-year basis. Year-to-date 5,655 vehicles have been sold of which 2,245 were passenger vehicles, 3,016 were light commercial vehicles, and 394 were medium and heavy commercial vehicles. On an annual basis, twelve-month cumulative new vehicle sales continued to trend downward with 8,215 new vehicles sold over the last twelve months, a 23.1% y/y contraction from the corresponding period last year.

A total of 278 new passenger vehicles were sold during September, representing a 34.3% m/m increase but a 13.1% y/y contraction. Year-to-date passenger vehicle sales rose to 2,245 units, down 36.5% when compared to the year-to-date figure recorded in September 2019. On a rolling 12-month basis passenger vehicle sales are at their lowest level since June 2004 at 3,261 units, highlighting the severity of the slowdown in sales. Consumer confidence has been plagued by poor economic conditions since 2016 and this has been further impacted by job losses and pay cuts this year brought on by Covid related lockdowns.  

The best month of 2020 in commercial vehicles sales thus far was recorded in September with 596 units sold. This is a 53.6% m/m, and 22.6% y/y increase. 537 Light commercial vehicles, 15 medium commercial vehicles, and 44 heavy and extra heavy commercial vehicles were sold during the month. On a twelve-month cumulative basis light commercial vehicle are down 18% y/y, medium commercial vehicle sales fell 14.8% y/y, and heavy commercial vehicle sales contracted by 17.1% y/y, 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 28.4% of the market, followed closely by Volkswagen with 26.9%. The two top brands maintained their large gap over the rest of the market with Kia and Hyundai following with 6.6% and 6.0% of the market respectively. No other manufacturer managed to breach the 5% market-share mark.

Toyota remained the leader in the light commercial vehicle space with a dominant 59.1% market share. Nissan and Ford were the only other manufacturers to breach the 10% market share level with 11.8% and 10.8% of the market respectively. Mercedes leads the medium commercial vehicle segment with 30.3% of sales year-to-date, closely followed by Hino with 27.3% of the market. Scania remained number one in the competitive heavy and extra-heavy commercial vehicle segment with 22.1% of the market share year-to-date, closely followed by Volvo Trucks and Mercedes with 19.1% and 17.6% of the market respectively.

The Bottom Line

September marks only the second month of 2020 where monthly new vehicle sales topped sales from the corresponding month in 2019, the other being February. The general trend in new vehicle sales remains negative as can be expected in an economy performing poorly. Consumers have been under pressure for a number of years now as the economy started to cool in 2015 after five years of rapid growth between 2010 and 2015. A slowdown in government spending in real terms, coupled with a halt in foreign direct investment brought on by poor policy guidance have resulted in a stagnant economy and as a result erosion of consumer and business confidence. This stagnation has been further exacerbated by lockdown measures aimed at slowing the spread of Covid 19.

A multitude of obstacles thus weigh on a return to growth for the Namibian economy, not least of which is the poor policy overhang. We thus expect the Namibian economy to remain fragile for the foreseeable future, and we expect this to be reflected in vehicle sales, building plan approvals as well as PSCE and other high frequency indicators.

PSCE – August 2020

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Overall

Total credit extended to the private sector (PSCE) increased by N$774.1 million or 0.76% m/m in August, bringing the cumulative credit outstanding to N$103.0 billion. On a year-on-year basis, private sector credit extension increased by 2.2% in August, somewhat quicker than the 1.9% growth recorded in July. On a rolling 12-month basis N$2.23 billion was extended to the private sector, with individuals taking up N$2.41 billion while N$188.9 million was extended to corporates. The non-resident private sector decreased borrowings by N$366.7 million.

Credit Extension to Individuals

Credit extended to individuals remained steady m/m, but increased by 4.3% y/y. The only category which recorded positive growth on a monthly basis was mortgage loans, which grew by 0.3% m/m and 4.4% y/y. Over the last twelve months N$1.73 billion worth of mortgage loans were extended to individuals, making up the majority of overall credit extended over the period. Instalment credit and leasing transactions (which have been combined as a category by the BoN) contracted by 0.4% m/m and 6.3% y/y, also reflected in the low demand for new vehicles. The other loans and advances category, comprising of shorter-term credit such as personal and card loans declined by 0.9% m/m, but rose by 12.4% y/y.

Credit Extension to Corporates

Credit extended to corporates grew by 1.8% m/m and 1.7% y/y in August, following the 1.5% m/m and 1.2% y/y contraction in July. The growth was mostly driven by increased demand of overdraft facilities by corporates, as the category recorded relatively strong growth of 6.5% m/m and 6.7% y/y. Mortgage loans extended to corporates contracted by 0.8% m/m and 6.3% y/y. The persistent contraction in installment credit continued in August, declining by 1.2% m/m and 11.6% y/y. Corporates continued to rely on short-term credit with the other loans and advances recording growth of 1.6% m/m and 5.3% y/y in August.

Banking Sector Liquidity

The overall liquidity position of commercial banks declined by N$341.1 million in August to reach an average of N$2.23 billion. The Bank of Namibia attributed the decline to an increase in net ZAR outflows as well as investments into government debt instruments. The outstanding balance of repo’s increase from N$429.8 million at the start of August to N$899.8 million by month end.

Reserves and Money Supply

As per the BoN’s latest money statistics release, broad money supply rose by N$12.6 billion or 11.3% y/y in August. Foreign reserve balances fell by N$2.01 billion or 5.7% m/m to N$33.4 billion in August. According to the BoN, the decline in foreign reserves was mainly due to net Rand purchases by commercial banks as well as increased foreign payments by the government during the month.

Outlook

As expected, the various rate cuts by the BoN thus far this year have not led to a significant increase in uptake of credit. With economic activity remaining very low and banks being prudent in extending credit, most of the credit uptake in August has been short-term borrowings by corporates. Continued reliance on short-term credit is a sign of businesses that are under financial pressure as short-term credit is not typically used to invest in capital projects. The uptake in mortgage loans by individuals is somewhat encouraging, although it could simply be that individuals are taking advantage of the low interest rate to borrow against their existing home loans as it is a relatively cheap source of funding. 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.