Category Archives: Economic Research

Economic Research

NCPI – September 2019

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The Namibian annual inflation rate slowed to 3.3% y/y in September, following the 3.7% y/y increase in prices recorded in August. On a month-on-month basis, prices rose 0.3% following a 0.1% price change recorded in August. On an annual basis, prices in seven of the twelve basket categories rose at a quicker rate in September than in August. One category remained unchanged, while the rate of price increases in four categories slowed for the month of September. Prices for goods rose by 3.0% y/y while prices for services increased by 3.5% y/y.

Food & non-alcoholic beverages, the second largest basket item in weighting, accounted for 0.8% of the total annual inflation figure. Prices in this category rose by 4.4% y/y, faster than the 4.1% recorded in August. Most of the sub-categories of food and non-alcoholic beverages showed relatively low monthly increases, while four of the sub-categories showed monthly decreases. The largest increases were observed in the prices of vegetables which increased by 15.1% y/y and fruits which increased by 11.7% y/y. The price of meat saw a price decrease of 0.2% y/y. The decline in meat prices is not expected to last however, as it is largely driven by high supply of animals as farmers slaughter more during the drought. Restocking farms in the future will likely lead to upward pressure on meat prices.

The housing and utilities category was the second largest contributor to annual inflation in September, accounting for 0.5% of the total 3.3% inflation figure. Price inflation for this category came in at 2.0% y/y, but remained relatively flat month-on-month, increasing only 0.1%. Annual inflation for rental payments remained unchanged at 2.3% in September and will likely remain this low for the rest of the year. The regular maintenance and repair of dwellings subcategory recorded an increase in prices of 3.4% y/y, which is a somewhat lower rate of increase than the 3.6% y/y registered the previous month. Month-on-month, prices in this subcategory decreased by 0.3%.

The education basket category recorded inflation of 12.0% y/y, with the cost of pre-primary and primary education growing at a rate of 12.6% y/y, while secondary- and tertiary education recorded price increases of 11.0% y/y and 12.7% y/y, respectively. All three subcategories printed no price increases on a month on month basis.

The zonal data shows that on a monthly basis, prices printed flat in the southern, eastern and western parts of the country, while rising elsewhere in the country. On an annual basis, the Windhoek and surrounding area, recorded the lowest inflation rate of 2.7% in September, with the mixed zone 3 covering the south, east and west of the country recording the highest rate of inflation at 4.4% y/y. Inflation in the northern region of the country increased to 3.0% y/y.

The Namibian annual inflation rate continued to slow, reaching 3.3% in September, and is the lowest annual rate since November 2015. The moderation in September’s annual figure was mostly a result of base effects, as the increase in prices of public transportation services in September 2018 no longer influences the annual inflation figure. The ongoing recession, coupled with low business and consumer confidence, has dampened the demand for goods and services, translating to lower overall inflation. IJG’s inflation model forecasts an average inflation rate of 3.8% y/y in 2019 and 3.9% y/y in 2020. The largest upside risk to this forecast is higher food costs, as the drought affects local food production.

New Vehicle Sales – September 2019

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A total of 806 new vehicles were sold in September, representing a 0.2% m/m decrease from the 808 vehicles sold in August. Year-to-date, 7,841 vehicles have been sold of which 3,534 were passenger vehicles, 3,763 were light commercial vehicles, and 544 were medium and heavy commercial vehicles. This is the lowest year-to-date sales witnessed since 2009. On a twelve-month cumulative basis, new vehicle sales continued its downward trend. 10,680 new vehicles were sold over the last twelve months, a 10.2% contraction from the previous twelve months and also the lowest level since 2009.

320 new passenger vehicles were sold in September, contracting by 11.1% m/m and 5.9% y/y. Year-to-date passenger vehicle sales rose to 3,534 units, down 11.1% when compared to the year-to-date figure recorded in September 2018. On an annual basis, twelve-month cumulative passenger vehicle sales fell 9.7% y/y as the number of passenger vehicles sold continued to decline.

A total of 486 new commercial vehicles were sold in September, increasing of 8.5% m/m but contracted by 24.8% y/y. Of the 486 commercial vehicles sold in September, 405 were classified as light commercial vehicles, 25 as medium commercial vehicles and 56 as heavy or extra heavy commercial vehicles. On a twelve-month cumulative basis, light commercial vehicle sales dropped 12.7% y/y, while medium commercial vehicle sales and heavy commercial vehicles rose 0.41% y/y and 12.3% y/y, respectively.  There has been an increase in the sale of heavy commercial vehicles on a year-to-year basis, from the 6.9% recorded in the preceding month. This illustrates a slight increase in the demand for durable goods by businesses.

Volkswagen leads the passenger vehicle sales segment with 30.4% of the segment sales year-to-date. Toyota in second place with 29.7% of the market-share as at the end of September. Kia, Mercedes, Hyundai and Ford each command around 5.0% of the market in the passenger vehicles segment, leaving the remaining 19.4% of the market to other brands.

Toyota retains a strong year-to-date market share of 58.5% and remains the market leader in the light commercial vehicle segment. Nissan remains in second position in the segment with 11.7% of the market, while Ford makes up third place with 9.3% of the year-to-date sales. Hino leads the medium commercial vehicle segment with 37.2% of sales year-to-date, while Scania was number one in the heavy- and extra-heavy commercial vehicle segment with 34.8% of the market share year-to-date.

The Bottom Line

Vehicle sales remain under pressure, with the year-to-date new vehicle sales in 2019 currently below 2010 levels, and the total new vehicle sales for the last 12 months down 10.2% from the same period in 2018. The number of vehicle sales recorded continues to decrease and any prospects of growth in the short-term remains dim. Latest data from the Namibia Statistics Agency recorded 2.6% contraction in the Namibian economy. As a result, we expect demand to remain subdued due to low consumer and business confidence.

Building Plans – August 2019

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A total of 193 building plans were approved by the City of Windhoek in August, 12 more than in July. The value of approvals increased to N$135.5 million in August as opposed to N$114.9 million in June. A total of 97 building plans were completed during the month with a value of N$98.1 million. Year-to-date, N$1.14 billion worth of building plans have been approved, 20.6% lower than the corresponding period in 2018. On a twelve-month cumulative basis, 1,937 building plans have been approved worth approximately N$1.54 billion, 19.1% lower in value terms than cumulative approvals in August 2018.

154 additions to properties were approved in August with a value of N$66.5 million, a drop of 8.9% m/m and 20.0% y/y in value terms. Year-to-date 1,061 additions to properties have been approved with a total value of N$501.7 million, a decrease of 5.9% y/y in number and 28.8% y/y in value terms. On a 12-month cumulative basis, the number of additions approved contracted by 10.3% y/y and 29.4% y/y in value terms. Year-to-date 607 additions have been completed with a combined value of N$309.3 million, down 61.8% y/y in number and 37.9% y/y in value terms.

New residential units accounted for 34 of the approvals registered in August, an increase of 9.7% m/m. In value terms, N$42.5 million worth of residential units were approved in August, increasing by 139.9% m/m but contracting by 54% y/y. Year-to-date residential unit approvals have decreased by 31.3% y/y in number and 8.5% y/y in value terms. On a 12-month cumulative basis, residential units recorded a 20.1% y/y decrease in number of approvals and a 7.4% y/y in value.

5 new commercial units, valued at N$26.5 million, were approved in August, bringing the year-to-date number of commercial and industrial approvals to 28, worth a total of N$235.1 million. Year-to-date, this is the same number of commercial approvals compared to the corresponding period in 2018, but represents a contraction of 19.1% y/y in value terms. On a rolling 12-month basis, the number of commercial and industrial approvals fell to 43 units worth N$495.1 million as at the end of August. This is a decrease of 15.7% y/y in number and 6.2% y/y in value. The drop-in figures indicate the declining level of activity in the industry.

In the last 12 months 1,937 building plans have been approved, decreasing by 12.4% compared to August 2018. These approvals amounted to N$1.54 billion, representing a decrease in value of 19.1% y/y. According to the Namibia Statistics Agency, construction industry recorded a negative sectoral growth rate of 27.8% in the first quarter of 2019 and 5.5% in the second quarter. We expect this trend to continue in the medium-term, given the current state of the economy. This continues to be of concern as the construction industry forms part of the key sectors along with mining and agriculture in the Namibian economy.

The BoN took the decision to cut interest rates by 25 bps in August and this has brought some relief to indebted consumers and businesses. However, private sector credit extension for August indicates that although there has been an increase in the uptake of credit on year-to-year basis, it has mainly been short-term and overdraft facilities. Household have taken up most (64.3%) of the credit extended compared to businesses. The outlook remains gloomy as the extension of short-term debt remains on the rise as opposed to financing for more productive loans.

The latest GDP data from the Namibia Statistics Agency indicates that key economic sectors remain under pressure and the economy is contracting by more than initial projections by the central bank.  According to the NSA, the economy has contracted by 2.6% in the second quarter of 2019 with growth in the construction sector contracting by 5.5% in real value-added terms. We expect the economy, and construction activity as a result, to remain under pressure as both consumer and business confidence remains low.