Category Archives: Economic Research

Economic Research

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.

Building Plans – December 2019

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A total of 91 building plans were approved by the City of Windhoek in December, which is a 51.1% m/m decline from the 186 plans approved in November. In value terms, however, approvals increased by 34.6% m/m to register N$166.4 million worth of approvals in December compared to N$123.6 million in November. A total of 45 buildings with a total value of N$36.4 million were completed during December, representing declines of 82.5% m/m and 84.5% m/m in the number and value of completions, respectively. A total of 2,032 building plans were approved in 2019, 86 fewer than in 2018. However, in value terms approvals increased by 8.3% in 2019, rising to N$1.99 billion from N$1.84 billion in 2018.

Additions to properties once again made up the majority of building plans approved in 2019. Of the 2,032 building plans approved in 2018, additions accounted for 1,630 of those approvals, 35 more than in 2018. In value terms however, approvals of additions for the year declined by N$151.2 million or 16.3% y/y. The value of additions approved has been contracting for the past four years, with the 2019 decline of 16.3% following the 13.5% contraction recorded in 2018. 65 additions were approved in December, 100 fewer than in November and 62.1% lower in value terms at N$32.8 million. During the year, 1,275 additions have been completed to a value of N$689.5 million, a drop of 43.9% y/y in number and 8.1% y/y in value.

New residential units were the second largest contributor to the total number of building plans approved with 355 approvals registered in 2019, 125 less than in 2018. In value terms new residential units approved increased from N$532.2 million in 2018 to N$640.8 million in 2019. On a month-on-month basis, the number of new residential approvals increased by 43.8% to 23 in December, while the value of approvals increased by 338.4% to N$123.0 million. This increase in value is mostly due to a single large residential approval of N$77.0 million in Khomasdal. 29 Residential units valued at N$29.5 million were completed in December, bringing 2019’s total number to 308, up 280.2% y/y, and value to N$409.5 million, up 290.8% y/y.

A total of 47 commercial and industrial units were approved in 2019 compared to the 43 approved in 2018. In value terms, commercial and industrial approvals rose by N$195.3 million or 51.4% for the year in 2019 from the N$380.3 million reported in 2018. On a month-on-month basis, a total of three commercial and industrial projects worth N$10.65 million were approved in December, representing a 40.0% m/m reduction in terms of number, but an increase of 16.4% m/m in terms of value. No commercial and industrial buildings were completed in December, leaving 2019’s number of completed buildings in this category unchanged at 29, an 81.3% y/y increase. In value terms, N$185.5 million worth of commercial and industrial units were completed in 2018, representing an increase of 249.9% y/y.

The number of building plans approved in 2019 declined by 4.1% compared to 2018 and the cumulative number of plans is down 40.3% from its peak in 2013. Although there has been an 8.3% y/y increase in the cumulative value of approvals to N$1.99 billion in 2019, the cumulative value of approvals is still down 23.6% from the peak in 2013 in nominal terms. Building plans approved is a leading indicator of economic activity in the country and the above data implies that the Namibian economy is still showing signs of hardship. The value of plans completed has however recovered more significantly during 2019 as can be seen in the below figure.