Category Archives: Economic Research

Economic Research

Building Plans – August 2019

By | | ,
Comments Off on Building Plans – August 2019

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.

PSCE – August 2019

By | | ,
Comments Off on PSCE – August 2019

Private sector credit extension (PSCE) increased by N$429.3 million or 0.43% m/m in August, bringing the cumulative credit outstanding to N$100.8 billion. On a year-on-year basis, private sector credit extension increased by 6.1% in August, a slowdown from the 7.4% recorded in July. On a rolling 12-month basis, N$5.8 billion worth of credit was extended to the private sector, with individuals taking up N$3.7 billion while N$2.3 billion was extended to corporates, and the non-resident private sector has decreased their borrowings by N$211.9 million.

Credit Extension to Individuals

Growth in credit extension to individuals increased to 0.5% m/m and 6.7% y/y compared to 0.5% m/m and 7.4% y/y growth recorded in July. Mortgage loans to individuals grew by 0.7% m/m and 6.8% y/y, and still showing some resiliency to the economic slowdown.

Other loans and advances (which is made up of credit card debt, personal and term loans) grew by 1.6% m/m and 21.6% y/y in August, while overdraft facilities extended to individuals have increased by 9.0% y/y the highest since November 2017, indicating that the uptake of short-term debt by households continues unabated. The increase in the uptake of short-term debt remains of concern as there is little appetite for more productive loans and consumers remain subject to higher interest terms. Installment credit, which consists largely of vehicle financing, contracted by 1.4% m/m and 5.4% y/y, as result of the continued decline new vehicle sales.

Credit Extension to Corporates

Credit extension to corporates increased to 0.2% m/m compared to the 0.6% m/m contraction recorded in July. On an annual basis, however, credit extension to corporates slowed down to 6.0% y/y in August, compared to the 8.3% y/y growth registered in July. Overdraft facilities extended to corporates contracted further by 3.0% m/m but rose 4.9% y/y. Mortgage loans to corporates contracted by 0.2% m/m but increased 5.0% y/y. Installment credit extended to corporates, which has been contracting since February 2017 on an annual basis, remains depressed, contracting by 0.3% m/m and 8.5% y/y in August.

Banking Sector Liquidity

The overall liquidity position of commercial banks improved in August, increasing by N$409.1 million to reach an average of N$3.66 billion. The higher liquidity resulted in a decrease in use of the BoN’s repo facility by commercial banks, with the outstanding balance of repo’s decreasing by N$5 million to N$386.5 million by month end.

Reserves and Money Supply

As per the BoN’s latest money statistics release, broad money supply rose by N$8.32 billion or 8.0% y/y in August, following a 6.6% y/y increase in July. Foreign reserve balances rose by N$1.75 billion to N$33.4 billion in August from N$35.2 billion in July.

Private sector credit extension growth increased by 6.11% y/y during August. From a 12-month rolling perspective, credit issuance down by 10.6% from the N$6.42 billion issuance observed over the preceding twelve-month period, with individuals taking up most (64.3%) of the credit extended.

The increase in the uptake of short-term debt and overdraft facilities by households to fund consumption needs, demonstrates the pressure consumers are under. This is of concern as consumers continue to live above their means. According to Bank of Namibia Financial Stability Report, the level of household indebtedness rose and stands at 95.5% in 2018 compared to 2017. Furthermore, demand is expected to be remain subdued as key sectors recorded declining growth rates. Our expectation is for private sector credit extension to remain under pressure as both consumer and business confidence remains low.

BoN took the decision to cut the Repo rate by 25 basis points at its August MPC meeting, this has brought heavily indebted consumers and corporates some relief. However, interest rates remain accommodative by historical standards and further rate cuts are unlikely to result in a meaningful increase in the uptake of credit.

New Vehicle Sales – August 2019

By | | ,
Comments Off on New Vehicle Sales – August 2019

A total of 808 new vehicles were sold in August, representing a 10.6% m/m decrease from the 904 vehicles sold in July. Year-to-date, 7,035 vehicles have been sold of which 3,214 were passenger vehicles, 3,358 were light commercial vehicles, and 463 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 sale continued its downward trend. 10,860 new vehicles were sold over the last twelve months, a 9.8% contraction from the previous twelve months and also the lowest level since 2009.

360 new passenger vehicles were sold in August, contracting by 5.8% m/m and 15.3% y/y. Year-to-date passenger vehicle sales rose to 3,214 units, down 11.6% when compared to the year-to-date figure recorded in August 2018. On an annual basis, twelve-month cumulative passenger vehicle sales fell 10.9% y/y as the number of passenger vehicles sold continued to decline.

A total of 448 new commercial vehicles were sold in August, representing a contraction of 14.2% m/m and 30.2% y/y. Of the 448 commercial vehicles sold in August, 389 were classified as light commercial vehicles, 26 as medium commercial vehicles and 33 as heavy or extra heavy commercial vehicles. On a twelve-month cumulative basis, light commercial vehicle sales dropped 10.5% y/y, while medium commercial vehicle sales and heavy commercial vehicles rose 1.7% y/y and 6.9% y/y, respectively. Heavy commercial vehicles have seen some buoyancy in the last couple of months with 190 vehicles being sold since the beginning of May 2019.

Toyota continues to lead the passenger vehicle sales segment with 30.4% of the segment sales year-to-date. Volkswagen in a close second place with 30.3% of the market-share as at the end of August. Kia, Mercedes, Hyundai and Ford each command around 4.9% of the market in the passenger vehicles segment, leaving the remaining 19.3% of the market to other brands.

Toyota with a strong market share of 58.5% year-to-date remains the market leader in the light commercial vehicle segment. Nissan remains in second position in the segment with 11.6% of the market, while Ford makes up third place with 8.8% of the year-to-date sales. Hino leads the medium commercial vehicle segment with 39.2% of sales year-to-date, while Scania was number one in the heavy- and extra-heavy commercial vehicle segment with 36.0% 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 9.8 from the same period in 2018. Vehicle sales is a lagging economic indicator and thus tells us little about what to expect going forward, but continues to illustrate the extent of the economic downturn. Presently, vehicle sales continue to point to low consumer and business confidence. This is evident as number of commercial vehicles sold year-to-date contracted by 14.0%, which shows a slowdown in the demand for durable goods by businesses.