Category Archives: Economic Research

Economic Research

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.

New Vehicle Sales – March 2020

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A total of 759 new vehicles were sold in March, representing a 5.0% m/m decrease from the 799 vehicles sold in February, and a 18.9% y/y decrease from the 936 new vehicles sold in March 2019. Year-to-date, 2,229 vehicles have been sold of which 956 were passenger vehicles, 1,110 light commercial vehicles, and 163 medium and heavy commercial vehicles. This is a 5.8% decline in the total number of new vehicles sold during the first quarter of 2020 when compared to 2019. On a twelve-month cumulative basis, vehicle sales continued to wane with a total of 10,265 new vehicles sold as at March 2020, down 9.0% from the 11,285 sold over the comparable period a year ago, and the lowest since April 2010.

318 New passenger vehicles were sold during March, declining by 8.4% m/m. On a year-on-year basis new passenger vehicle sales were 24.6% lower than the 422 units sold in March 2019. Year-to-date passenger vehicle sales rose to 956, reflecting lower annual sales than the preceding 15 years, and a 14.5% decline from the first quarter of 2019.

A total of 441 new commercial vehicles were sold in March, representing a contraction of 2.4% m/m and 14.2% y/y. Of the 441 commercial vehicles sold in March 389 were classified as light, 23 as medium and 29 as heavy. On an annual basis, light commercial sales fell by 19.5% y/y, medium commercial sales climbed 53.3% y/y and heavy commercial vehicle sales increased by 81.3% y/y. The increases in medium and heavy commercial sales are however from a low base. On a twelve-month cumulative basis light commercial vehicle sales have declined 13.0% y/y, medium commercial vehicles rose by 17.1% y/y, and heavy commercial vehicles rose 25.6% y/y. These high growth figures are again from a very low base.

Toyota continued to lead the market for new passenger vehicle sales in March, claiming 30.9% of the market, followed closely by Volkswagen with a 29.0% share. They were followed by Kia and Hyundai at 7.2% and 5.8% 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 57.6% market share, with Nissan in second place with a 16.3% market share. Ford and Isuzu claimed 8.7% and 5.6%, respectively, of the number of light commercial vehicles sold thus far in 2020. Mercedes leads the medium commercial vehicle segment with 31.0% 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

March new vehicle sales generally have a seasonal effect of being slightly higher due to it being the end of the tax year. This was however not the case in 2020 with new vehicle sales were depressed in March, declining by 9.0% y/y on a twelve-month cumulative basis, to to 10,265 vehicles. It should be noted that the data precedes the 21-day lockdown of the two most economically significant regions and as a result, vehicle sales are expected to be significantly lower in April. Used vehicle sales will similarly be affected by this. Both consumers and businesses are expected to be under considerable financial stress in the short- to medium term as a result of the lockdown, and we thus expect vehicle sales to remain at lower levels in the months to come.