Category Archives: Economic Research

Economic Research

PSCE – September 2019

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Overall

Private sector credit (PSCE) increased by N$644.5 million or 0.64% m/m in September, bringing the cumulative credit outstanding to N$101.4 billion. PSCE grew at a marginally faster rate of 6.2% y/y in September compared to 6.1% y/y in August. On a rolling 12-month basis N$5.95 billion worth of credit was extended to the private sector, down 10.2% y/y. Individuals took up N$3.80 billion while N$2.36 billion was extended to corporates, and the non-resident private sector decreased their borrowings by N$201.9 million.

Credit Extension to Individuals

Credit extended to individuals increased by 6.8% y/y in September, almost unchanged from the 6.7% y/y growth recorded in August. Mortgage loans extended to individuals increased by 0.4% m/m and 6.7% y/y. Installment credit continued to contract, by 0.7% m/m and 6.0% y/y. Other loans and advances (which is made up of credit card debt, personal and term loans) grew by 2.3% m/m and 23.1% y/y in September. Household demand for overdraft facilities remained relatively strong in September, increasing by 1.8% m/m and 11.0% y/y.

Credit Extension to Corporates

Credit extension to corporates grew by 1.0% m/m and 6.2% y/y. On a rolling 12-month basis N$2.36 billion was extended to corporates as at the end of September, an increase of 44.1% y/y. Although the uptick in the general demand for credit by corporates over the last year seems positive, the biggest driver of the increase in credit extended to corporates was shorter-term debt. Overdraft facilities extended to corporates grew by 2.4% m/m and 5.1% y/y, while other loans and advances to corporates increased by 1.1% m/m and 16.0% y/y. The increase in these categories indicates that businesses are still relying on overdrafts and credit card debt to keep the lights on. Mortgage loans by corporates increased by 1.0% m/m and 4.9% y/y, while installment credit increased by 1.4% m/m, but contracted by 6.2% y/y.

Banking Sector Liquidity

The overall liquidity position of commercial banks declined by N$670.0 million in September to reach an average of N$2.99 billion. The Bank of Namibia attributed the decline in liquidity to lower domestic Government spending mainly due to lower economic activity coupled with higher foreign currency outflows as a result of import payments during the review period.

Reserves and Money Supply

As per the BoN’s latest money statistics release, broad money supply rose by N$1.34 billion or 8.4% y/y in September, following an 8.0% y/y increase in August. Foreign reserve balances fell by N$1.16 billion to N$32.3 billion in September from N$33.4 billion in August. According to the BoN, the decrease was mostly due to an increase in net foreign capital outflows during the period under review.

Outlook

Private sector credit extension continues to languish, increasing by 6.2% y/y during September. It has been 35 months since PSCE last recorded double digit growth. As expected, the 25-basis point rate cut in August has not resulted in higher demand for credit, as consumers are already overindebted and growth opportunities for businesses are few due to a lack of demand. As mentioned earlier, corporates continue to rely on short-term debt to keep the lights on instead of taking on longer-term credit to invest in capital projects to expand operations. We do not expect conditions to improve in the short- to medium-term.

Building Plans – September 2019

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A total of 202 building plans were approved by the City of Windhoek in September. This is a 4.7% increase in the number of plans approved on a monthly basis when compared to the 193 building plans approved in August. In monetary terms, the approvals were valued at N$432.2 million, an increase of N$296.7 million or 218.9% compared to last month. The number of completions for the month of September stood at 225, valued at N$110.0 million. The year-to-date value of approved building plans currently stands at N$1.57 billion, 0.7% lower than as at the end of the third quarter of 2018. On a twelve-month cumulative basis, 1,986 building plans worth approximately N$1.83 billion were approved, a decrease in number of 9.1% y/y, but a contraction of 5.6% in value terms over the prior 12-month period.

The largest portion of building plan approvals was once again made up of additions to properties, from a number perspective. 160 additions to properties were approved in September, a 3.9% increase over the number of additions approved in August. Year-to-date 1,221 additions to properties have been approved with a cumulative value of N$579.2 million, a decline of 22.6% y/y in terms of value compared to the same period in 2018. Completed additions amounted to 206, valued at N$85.6m, increasing by 171.1% y/y in number and 69.1% y/y in value. Year-to-date 813 additions have been completed to a value of N$395.0m, decreases of 55.4$ y/y in number and 36.2% y/y in value.

New residential units were the second largest contributor to the number of building plans approved with 35 approvals registered in September, compared to 34 in August. In value terms, N$43.6 million worth of residential units were approved in September, a 2.5% m/m increase. 285 New residential units valued at N$442.0m were approved in the first nine months of 2019, 28.2% y/y less in number and 3.9% y/y less in value than during the corresponding period in 2018. The year-to-date value of residential approvals reached N$442.0 million, 3.9% lower than during the corresponding period in 2018. 19 residential units valued at N$24.3m were completed in September bringing the year-to-date number to 225, up 275.0% y/y, and value to N$323.2m, up 216.2% y/y.

Commercial and industrial building plans approved in September amounted to 7 units, worth N$311.1 million. 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 less than 4 approvals per month over the last 12 months. On a 12-month cumulative basis, the number of commercial and industrial approvals has decreased by 15.4% y/y in September to 44 units, worth approximately N$557.5 million, an increase of 34.5% in value terms over the prior 12-month period. It should however be noted that a single commercial building plan approved in September, a N$250.0 million project by Nedbank approved for the city centre, propped up the value approved year-to-date, saving the category from recording another contraction. No commercial and industrial building plans were recorded as completed in September.

During the last 12 months, 1,986 building plans have been approved, decreasing by 9.1% y/y. These approvals were worth a combined N$1.83 billion, a decrease in value of 5.6% y/y. The number of building plans approved, on a cumulative 12-month basis, has been contracting over the last three months. The overall decrease in both number and value of cumulative plans approved is concerning as, even in nominal terms, this indicates a continuing decrease of construction activity in the capital. Low consumer and business confidence means that growth in construction activity will likely remain subdued for the short- to medium-term.