Category Archives: Economic Research

Economic Research

New Vehicle Sales – April 2020

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A total of 50 new vehicles were sold in April, a 93.4% m/m contraction from the 759 vehicles sold in March. Year-to-date, 2,279 vehicles have been sold of which 965 were passenger vehicles, 1,149 light commercial vehicles, and 165 medium and heavy commercial vehicles. On a twelve-month cumulative basis, vehicle sales continued to dwindle with a total of 9,389 new vehicles sold as at April 2020, down 17.7% from the 11,405 sold over the comparable period a year ago. The dismal new vehicle sales figures were expected seeing as that the Khomas and Erongo regions were on lockdown for the entire month, and the rest of the country was on lockdown for two weeks.

Only 9 new passenger vehicles were sold during April, representing a contraction of 97.2% m/m from the 318 passenger vehicles sold in March. On a year-on-year basis, April new passenger vehicle sales were 98.1% lower than the 464 vehicles sold a year ago. Year-to-date, passenger vehicle sales rose to 965. On a rolling 12-month basis, passenger vehicle sales are at their lowest level since May 2010, highlighting the severity of the slowdown in sales.

Commercial vehicles sales reflect a similar picture, declining by 23.1% year-to-date and 16.1% y/y on a rolling 12-month basis. A total of 41 new commercial vehicles were sold in April, representing a decrease of 90.7% m/m and 91.1% y/y. 39 Light commercial vehicles, 2 medium commercial vehicles, and no heavy and extra heavy commercial vehicles were sold during the month. On a twelve-month cumulative basis, light commercial vehicle sales dropped 19.5% y/y, while medium commercial vehicle sales rose 15.6% y/y, and heavy commercial vehicle sales increased by 14.2% y/y.

Toyota was one of three manufacturers managing to sell passenger vehicles during April and continues to lead the market in terms of year-to-date market share of new passenger vehicles sold. Toyota claimed 31.3% of the market, followed closely by Volkswagen with 28.7% of the market. They were followed by Kia and Hyundai with 7.2% and 5.7% of the market respectively, while the rest of the passenger vehicle market was shared by several other competitors.

Toyota also remained the leader in the light commercial vehicle space with a 58.7% market share, with Nissan in second place with 15.8% market share. Ford and Isuzu claimed 8.6% and 5.4%, respectively, of the number of light commercial vehicles sold thus far in 2020. Mercedes leads the medium commercial vehicle segment with 30.0% of sales year-to-date. Mercedes was also number one in the heavy and extra-heavy commercial vehicle segment with 21.9% of the market share year-to-date.

The Bottom Line

New vehicle sales have been under pressure in recent years as domestic economic conditions have generally been tough. The lockdowns of first the Khomas and Erongo regions, followed by the lockdown of the entire country, has brought vehicle sales to a complete standstill in the last two months. While we do believe that vehicle sales will higher in the coming months than in April, it is unlikely that it will return to the levels seen in recent months and years. Both business and consumer confidence are extremely low at the moment as a result of the impact of the lockdowns. It is unlikely that many businesses and consumers will be in a financial position to purchase new vehicles for the rest of the year.

PSCE – March 2020

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Overall

Total credit extended to the private sector (PSCE) decreased by N$130.5 million or 0.13% m/m in March, bringing the cumulative credit outstanding to N$103.6 billion. This is the second consecutive month that we have seen a month-on-month contraction in credit extension. On a year-on-year basis, private sector credit extension grew by 5.79% in March, compared to 5.87% in February. N$2.23 billion worth of credit has been extended to corporates and N$3.73 billion to individuals on a 12-month cumulative basis, while the non-resident private sector has decreased their borrowings by N$204.0 million.

Credit Extension to Individuals

Credit extended to individuals increased by 0.4% m/m and 7.2% y/y in March, versus 0.5% m/m and 6.7% y/y in December. Installment credit remained depressed, contracting by 0.4% m/m and 4.8% y/y. Individuals repaid their overdrafts during the month, resulting in a decline of 1.0% m/m, but an increase of 14.4% y/y. The value of mortgage loans extended to individuals grew by 0.6% m/m and 5.9% y/y. Other loans and advances (or OLA, which is made up of credit card debt, personal and term loans) grew by 0.5% m/m and 27.2% y/y in March. We expected the OLA category to be higher considering that a large number of consumers were ‘panic buying’ staple products (such toilet paper) ahead of the lockdown.

Credit Extension to Corporates

Credit extended to corporates contracted by 0.7% m/m in March after contracting by 1.2% m/m in February. On an annual basis credit extension to corporates increased by 4.6% y/y in March. The month-on-month contraction is mostly caused by businesses paying back overdrafts. Overdraft facilities extended to corporates decreased by 3.9% m/m and 1.1% y/y. Mortgage loans to corporates increased by a moderate 0.2% m/m and 0.3% y/y. Installment credit extended to corporates, which has been contracting since February 2017 on an annual basis, remained depressed, contracting by 0.8% m/m and 7.5% y/y in March.

Banking Sector Liquidity

The overall liquidity position of commercial banks decreased by N$71.3 million to reach an average of N$254.5 million. Commercial banks continued to utilise the BoN’s repo facility, as the overall liquidity position remained low. The balance of repo’s outstanding increased from N$1.01 billion at the start of March to N$1.61 billion at the end of the month. The BoN ascribes the low liquidity position to the commercial banks buying liquid assets such as treasury bills, as opposed to keeping cash in the current weak domestic economic environment. It is worth noting that the liquidity position improved substantially in April.

Reserves and Money Supply

Broad money supply rose by N$9.23 billion or 5.9% y/y in March, as per the BoN’s latest monetary statistics release. Foreign reserve balances rose by 2.5% m/m to N$32.97 billion in March. According to the BoN, the increase was supported by a favourable exchange rate during the period.

Outlook

Private sector credit extension remained depressed at the end of March, increasing by only 5.8% y/y, with annualised growth slowing for a second consecutive month. From a rolling 12-month perspective, credit issuance is up 5.9% from the N$5.36 billion issuance observed at the end of March 2019, with individuals taking up most (70.3%) of the credit extended over the past 12 months.

While this hasn’t been the case in March, when the lockdown started, we expect both consumers and businesses to have increased their uptake of short-term debt in April to cover costs while economic activity, and subsequently some individual’s incomes and company revenues, ground to a halt. The second surprise 100 basis point repo rate cut in April should provide these financially stressed businesses and consumers with some relief, but we don’t expect it to push PSCE growth as banks will remain very weary of who they are providing loans to given the current economic situation.

NCPI – March 2020

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The Namibian annual inflation rate remained relatively unchanged at 2.4% y/y in March, following 2.5% y/y uptick in prices in February. Prices in the overall NCPI basket increased by 0.1% m/m, as inflationary pressures remain muted. On a year-on-year basis, overall prices in four of the twelve basket categories rose at a quicker rate in March, while six 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 1.0% y/y. 

As in February, Transport was the largest contributor to annual inflation in March, accounting for 0.6 percentage points of the total 2.4% annual inflation rate. Transport prices fell by 0.3% m/m, but rose 4.4% y/y in March. The Ministry of Mines and Energy dropped the fuel pump price of diesel by 30 cents per litre in March, which resulted in a price drop of 0.5% m/m in the operation of personal transport equipment sub-category, and the annual increase to slow to 5.5% y/y in March from 5.9% y/y recorded in February. Given that a relatively large fuel pump price cut was announced for both petrol and diesel for April, inflationary pressure is likely to remain very low for this subcategory. Despite OPEC agreeing to cut oil production by 9.7 million barrels in May and June, oil prices are expected to remain low for the next few months as the demand for oil remains low, and oil producers are running out of storage space. The purchase of vehicles subcategory recorded price increases of 4.9% y/y, while the prices of public transport services remained steady.

Prices for the food & non-alcoholic beverages category was the second largest contributor to the annual inflation rate in March. Prices in this category rose by 0.1% m/m and 2.9% y/y. Prices in twelve of the thirteen subcategories recorded increases on an annual basis. The largest increases were observed in the prices of fruits which increased by 16.4% y/y and vegetables which increased by 8.3% y/y. The bread and cereals subcategory recorded price decreases of 0.9% m/m and 0.7% y/y.

The education basket recorded inflation of 7.6% y/y, with the cost of pre-primary education growing at a rate of 5.6% y/y. Primary and secondary education recorded price increases of a rather hefty 23.1% y/y, while tertiary education prices fell by 2.6% y/y. None of the three subcategories printed price increases on a month-on-month basis.

The NSA’s regional CPI data shows that on a monthly basis prices declined by 0.1% in the northern zone 1 while rising by 0.1% elsewhere in the country. On an annual basis the Windhoek and surrounding area, in zone 2, recorded the lowest inflation rate at 1.9% y/y in March, with the northern region recording the highest rate of annual inflation at 2.6% y/y. Inflation in zone 3 (Eastern, Southern and Western regions) remained unchanged at 2.5% y/y.

Namibian annual inflation remained muted in March at 2.4% compared to 2.5% in February. We expect this to remain the case for the rest of the year. Oil prices are expected to remain low for as long as factories across the world remain closed. The lockdown imposed by the Namibian government has put a number of businesses and consumers under severe financial pressure, which will result in consumers simply not being able to afford higher prices on goods and services. This will put further downward pressure on inflation as consumers will mostly direct their spending toward essential goods and services. IJG’s inflation model forecasts an average inflation rate of 2.6% y/y in 2020 and 4.3% y/y in 2021.