Category Archives: Economic Research

Economic Research

Building Plans – January 2020

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A total of 121 building plans were approved by the City of Windhoek in January, representing a 33.0% m/m increase from the 91 building plans approved in December. In monetary terms, the approvals were valued at N$189.4 million, an increase of N$23.0 million compared to last month. Buildings with a value of N$16.4 million were completed during January. January 2020 is off to a slower start in terms of both number and value of approvals, compared to January 2019 when 162 building plans worth N$272.7 million got the nod. On a twelve-month cumulative basis, 1,991 building plans worth approximately N$1.90 billion were approved, a decline in number of 6.4% y/y, but an increase of 3.6% in value terms over the prior 12-month period.

In terms of number of approvals, additions to properties made up the largest portion of approvals. For the month of January, 98 additions to properties were approved with a value of N$35.7 million, 33 fewer than the number of additions approved in January 2019. The value of the additions approved in January is however only N$864,000 less than those observed in the first month of 2019. 14 additions worth N$3.6 million were completed during the month.

New residential units were the second largest contributor to the total number of building plans approved in January. 17 new units worth N$17.8 million were approved in January, representing an 89.4% decrease from the N$167.9 million worth of approvals in the first month of 2019. On a 12-month cumulative basis, residential units recorded a 30.3% y/y decrease in number of approvals and a 27.3% y/y decrease in value. 19 new residential units worth N$12.8 million were completed during the month.

Commercial and industrial building plans approved in January amounted to 6 units, worth N$136.0 million. This compares to 2 units valued at N$70.0 million approved in January 2019. On average over the last 20 years, 4 commercial units valued at N$26.2 million were approved in the first month of the year. It is interesting to note that three of January 2020’s approvals, worth N$85.3 million, are part of a large building project planned in the Otjomuise vicinity. No commercial and industrial units were completed in January.

The 12-month cumulative number of building plans approved decreased by 6.4% y/y in January. A total of 1,991 building plans to the value of N$1.91 billion were approved over the last 12 months which represents an increase in value terms of 3.6% y/y. The majority of these approvals are additions to properties which are typically of low relative value. While growth in commercial and industrial construction activity has picked up slightly, it is from a low base, and construction activity in the commercial and industrial space remains very subdued. The low number of approvals is an indication that the construction sector is likely to remain under pressure during the rest of the year.

NCPI – January 2020

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The Namibian annual inflation rate slowed considerably to 2.1% in January, following the 2.6% y/y increase in prices recorded in December. Prices in the overall NCPI basket increased 0.6% m/m. On a year-on-year basis, overall prices in four of the twelve basket categories rose at a quicker rate in January than in December, while the other eight recorded slower rates of inflation. Prices for goods increased by 2.6% y/y while prices for services increased by 1.3% y/y.

Transport, the third largest basket item, was the largest contributor to annual inflation, accounting for 0.7 percentage points of the total 2.1% annual inflation rate. Transport costs increased by 0.2% m/m and 5.0% y/y. The purchase of vehicles subcategory saw price increases of 4.6% y/y, while the operation of personal transport equipment subcategory recorded price increases of 6.1% y/y. Fears of the global economic impact of the coronavirus has pushed the price of Brent crude oil down 11.9% in January to around US$58 a barrel. Although it is unlikely for the oil price to remain at current levels in the long run, the lower oil price does at least mean that the likelihood for transport inflation to increase substantially in the short term is low.

Food & non-alcoholic beverages, the second largest basket item in weighting, accounted for 0.4 percentage points of the total inflation figure. Food and non-alcoholic beverage prices increased by 2.1% y/y, ticking up from inflation of 1.7% y/y recorded in December. Prices in twelve of the thirteen sub-categories recorded increases on an annual basis. The largest increases were observed in the prices of fruits which increased by 13.8% y/y and vegetables which increased by 8.4% y/y. The meat sub-category meanwhile saw a marginal price decrease of 0.5% y/y in January. Rainfall figures have so far been mixed, with the northern and eastern regions receiving normal- to above-normal amounts of rain, and the central and southern regions receiving below-normal amounts of rain. Should these regions continue to experience poor rainfall for the rest of the rainy season, local food production will be affected which could lead to higher food price inflation.

Alcoholic beverages and tobacco prices, making up approximately 12.6% of the overall inflation basket, was the third highest contributor to the annual inflation rate in January, with prices of the basket item increasing 0.1% m/m and 2.6% y/y. The main driver in this basket category was alcohol prices which increased by 4.4% y/y while tobacco prices were down 5.1% y/y.

According to the zonal data, the northern regions of the country recorded the highest rate of inflation in January at 1.2% m/m and 2.6% y/y. The central region recorded the lowest inflation rate at 0.2% m/m and 1.0% y/y, while the mixed zone 3 covering the south, east and west of the country recorded inflation of 0.5% m/m and 2.5% y/y.

As the graph above depicts, Namibian annual inflation has been slowing almost consistently since November 2018, and is currently trending at levels last seen in 2005. January’s figure of 2.1% y/y is particularly low as a result of annual rental adjustments being put through. According to the NSA, the prices for the rental payments for dwellings sub-category declined by 1.5% y/y in January. As the tough economic conditions persist, it is ever more difficult for landlords to push up rental prices. As rental payments make up a large portion of the CPI basket, the deflationary adjustment means that Namibian annual inflation in 2020 is likely to be well below Namibia’s long run average. IJG’s inflation model forecasts an average inflation rate of 3.3% y/y in 2020. Lower expected inflation, coupled with low economic growth forecasts means that there is a lot of leeway for the Bank of Namibia’s MPC to cut the repo rate at its February meeting.

New Vehicle Sales – January 2020

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A total of 671 new vehicles were sold in January, which represents 6.0% m/m decrease from the 714 vehicles sold in December, and a drop of 1.0% from the 678 new vehicles sold in January 2019. On a twelve-month cumulative basis, a total of 10,394 new vehicles were sold as at January 2020, representing a contraction of 11.4% from the 11,733 sold over the same period a year ago. 2020 is thus off to sluggish start as illustrated by the lowest monthly new vehicles sales number since May 2009.

291 new passenger vehicles were sold during January, a contraction of 7.3% m/m from the 314 passenger vehicles sold in December, and a decline of 14.9% y/y from the 342 new passenger vehicles sold in January 2019. On a rolling 12-month basis, new passenger vehicle sales fell 1.1% m/m and 10.6% y/y at the end of January, and were down 54.2% from the peak in April 2015.

Commercial vehicle sales declined to 380 units in January, representing a contraction of 5.0% m/m, but an increase of 13.1% y/y. During the month 335 light commercial vehicles, 14 medium commercial vehicles, and 31 heavy commercial vehicles were sold. On a year-on-year basis, light commercial sales have increased by 11.3%, medium commercial vehicles were flat, and heavy and extra heavy vehicle sales rose 47.6% y/y. On a twelve-month cumulative basis, light commercial vehicle sales have declined by 14.9% y/y, medium commercial vehicles rose by 9.0% y/y, and heavy commercial vehicles sales rose 17.6% y/y.

Volkswagen started the year off with a 32.6% market share of new passenger vehicles sold, followed by Toyota with a 21.3% market share. They were followed by Kia and Hyundai with 8.9% and 7.9% of the market respectively, while the rest of the passenger vehicle market was shared by several other competitors.

Toyota meanwhile started the year off with a solid grip on the light commercial vehicle market with a 57.6% market share, with Nissan in second place with a 15.5% market share. Ford and Volkswagen claimed 9.6% and 5.1% of the number of new light commercial vehicles sold during the month, respectively. Mercedes lead the medium commercial vehicle category with 42.9% of sales, while Volvo was number one in the heavy and extra-heavy commercial vehicle segment with 25.8% of the market share during the month.

The Bottom Line

Cumulative new vehicle sales fell to the lowest level in ten years on a rolling 12-month basis. This is a consequence of the incessant recessionary environment we find ourselves in, which is characterised by depressed business and consumer confidence, as well as lower government spending. The low sales figures show that both consumers and businesses continue to face economic hardship, with many preferring to hold on to their existing vehicles for longer, or opting to buy second-hand vehicles instead. The prospects for new vehicle sales in 2020 are likely to remain dim as economic conditions are expected to remain difficult for the rest of the year.