Category Archives: Economic Research

Economic Research

Building Plans – December 2020

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A total of 115 building plans were approved by the City of Windhoek in December, which is a 57.6% m/m decline from the 271 building plans approved in November. In value terms, approvals fell by 68.2% m/m to register N$75.4 million worth of approvals in December, compared to N$237.2 million in November. A total of 51 building plans worth N$32.0 million were completed during the month, representing an increase of 13.3% y/y in number, but a decline of 12.0% in value of completions. A total of 2,282 building plans were approved in 2020, 250 more than in 2019. However, in value terms approvals fell by 7.0% in 2020, declining from N$1.99 billion in 2019 to N$1.85 billion in 2020.

Additions to properties once again made up the majority of building plans approved in 2020. Of the 2,282 building plans approved in 2020, additions accounted for 1,601 of these approvals, 29 fewer than in 2019. In value terms, approvals of additions for the year declined by N$78.3 million or 10.1% y/y. The value of additions approved has been contracting for the past five years, with a decline of 10.1% recorded in 2020 following the 16.3% contraction in 2019. 84 additions were approved in December, 81 fewer than in November and 74.9% lower in value terms at N$23.9 million. During the year, 886 additions have been completed to a value of N$454.1 million, a drop of 30.5% y/y in number and 34.1% y/y in value terms.

New residential units were the second largest contributor to the total number of building plans approved with 640 approvals registered in 2020, 285 more than in 2019. In value terms, new residential units approved increased from N$640.8 million in 2019 to N$823.5 million in 2020. On a month-on-month basis, the number of new residential approvals decreased by 71.2% to 30 in December, while the value of approvals declined by 80.9% to N$25.3 million. 30 Residential units valued at N$16.8 million were completed in December, bringing 2020’s total number to 720, up 133.8% y/y, and value to N$1.04 billion, up 155.0% y/y.

A total of 41 commercial and industrial units were approved in 2020 compared to the 47 approved in 2019. In value terms, commercial and industrial approvals fell by N$244.5 million or 42.5% for the year in 2020 from the N$575.6 million reported in 2019. In December, only 1 new commercial unit valued at N$26.2 million was approved, 1 fewer than in November, but a 162.2% m/m increase in terms of value. 1 Commercial and industrial building was completed in December, bringing the year’s total to 12, a 58.6% decline from 2019. In value terms, N$39.7 million worth of commercial and industrial units were completed in 2020, representing a contraction of 78.6% y/y.

The number of building plans approved in 2020 rose by 12.3% compared to 2019, but the cumulative number of plans remains down 32.9% from its peak in 2013. The cumulative value of approvals fell 7.0% y/y to N$1.85 billion in 2020 and is down 29.0% from the peak in 2013 in nominal terms. Building plans approved is a leading indicator of economic activity in the country and the above data implies that the Namibian economy is still showing signs of hardship. The significantly lower commercial building plan approvals in 2020 is another sign of this and indicate that most businesses are not planning on expanding their existing operations.

NCPI – December 2020

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The Namibian annual inflation rate increased marginally to 2.4% y/y in December, following the 2.2% y/y increase in prices recorded in November. Prices in the overall NCPI basket remained steady on a month-on-month basis, an indication of the subdued inflationary pressure currently being experienced. The annual average inflation rate for 2020 was 2.2%, compared to 3.7% in 2019 and 4.3% in 2018. On a year-on-year basis, overall prices in five of the twelve basket categories rose at a quicker rate in December than in November, with four categories recording slower rates of inflation and three categories recorded consistent with the prior month. Prices for goods increased by 3.5% y/y while prices for services increased by 0.9% y/y.

As it has been the case for the majority of the year, the food & non-alcoholic beverages category was the largest contributor to annual inflation in December, accounting for 1.3 percentage points of the total 2.4% annual inflation rate. Price inflation for this category came in at 0.1% m/m and 7.6% y/y, the highest annual figure since February 2017. Prices in all thirteen sub-categories recorded increases on an annual basis with the largest being observed in the prices of fruits which increased by 17.7% y/y and oils and fats which increased by 12.2% y/y.

The alcoholic beverages and tobacco basket item, the third-largest basket item by weighting, was the second-largest contributor to the annual inflation rate in December. The category displayed a price decrease of 0.4% m/m, but an increase of 4.3% y/y. Prices for alcoholic beverages decreased at a rate of 0.5% m/m, but rose 3.2% y/y, while tobacco prices fell by 0.2% m/m, but increased 9.3% 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% y/y, while the primary and secondary education recorded price increases of 9.3% y/y. Tertiary education prices rose by 5.3% y/y. All three subcategories printed no price increases on a month-on-month basis.

The Namibian annual inflation rate trended lower than that of neighbouring South Africa’s during the entire year. Inflationary pressure in Namibia has been particularly low since the outbreak of Covid-19 due to a lack of demand for both goods and services. The almost persistent inclusion of the education basket item, which has the 8th highest weighting, in the top contributors to inflation in 2020 is an indication of how subdued the inflationary pressure is. IJG’s inflation model forecasts an average inflation rate of 3.2% y/y in 2021 and 4.5% in 2022, thus indicating a steady increase in the inflation rate over the next two years. The largest upside risk to this forecast is higher food costs and fuel prices.

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.