Category Archives: Economic Research

Economic Research

PSCE – May 2019

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Overall

Total credit extended to the private sector (PSCE) increased by N$1.36 billion or 1.37% m/m in May, bringing the cumulative credit outstanding to N$100.45 billion. On a year-on-year basis, private sector credit extension grew by 8.03% in May, compared to 6.71% recorded in March. On a rolling 12-month basis N$7.46 billion worth of credit was extended. N$4.13 billion worth of credit has been extended to corporates and N$3.52 billion to individuals on a 12-month cumulative basis, while the non-resident private sector has decreased their borrowings by N$185.3 million, the third consecutive month in which this has happened.

Credit Extension to Individuals

Growth in credit extended to individuals slowed to 6.4% y/y in May, a noticeable decrease from the growth of 7.0% y/y recorded in April. However, the biggest driver of the increase in credit extended to individuals was a 6.9% y/y increase in mortgage loans, followed by other loans and advances increasing by 23.9%. Other loans and advances have increased to N$7.22 billion, growing at a much quicker pace than overdrafts. Overdraft facilities extended to individuals have increased by 0.5% m/m and 3.7% y/y.

Growth in credit extended to households slowed to 0.4% m/m from 0.6% m/m in April. The value of mortgage loans extended to individuals increased by 0.4% m/m and 6.9% y/y. While instalment credit extension remained depressed, contracting by 0.6% m/m and 5.9% y/y.

Credit Extension to Corporates

Credit extension to corporates increased by 2.8% m/m and 11.2% y/y in May. On a rolling 12-month basis, N$4.13 billion was extended to corporates as at the end of May compared to the N$2.86 billion as at the end of April.  The month-on-month increase was largely driven by mortgage loans extended to corporates which increased by 4.9% m/m and 6.1% y/y. The use of short-term facilities, particularly overdrafts, increased by 2.9% m/m and 11.1% y/y. Other loans and advances, which consists of credit card debt and short-term loans, extended to businesses increased by 3.4% m/m and 28.2% y/y.

Over the last twelve months the use of short-term facilities has increases greatly, pointing to stressed cash flow among corporate borrowers. While a symptom of the lacklustre economic climate, there is a limit to how long businesses can rely on such facilities in the absence of improved economic conditions. The spike in use of short-term facilities is concerning given that expectations are for poor economic conditions to persist in the short-to medium-term.

Banking Sector Liquidity

The overall liquidity position of commercial banks decreased by N$361.5 million to an average of N$3.79 billion during May from the N$4.15 billion in April. According to the Bank of Namibia (BoN), the decline in liquidity balances stemmed mainly from increased demand for BoN bills during the period under review. There was an increase in the use of BoN’s repo facility by commercial banks, with the outstanding balance of repo’s increasing from N$290.9 million at the start of May to N$ N$398.1 million by the end.

Reserves and Money Supply

Broad money supply rose by N$11.6 billion or 11.7% y/y in May following a 10.2% y/y increase in April, as per the BoN’s latest monetary statistics release. Foreign reserve balance contracted by 0.1% m/m down by N$33.7 million to N$34.1 billion. The BoN stated that the decreased is largely due to net capital outflows of foreign currencies through commercial banks, coupled with net government payments during the month under review.

Outlook

From a 12-month rolling perspective, credit issuance is up 48.0% from the N$5.04 billion issuance observed at the end of May 2018, with corporates taking up 55.3% of the credit extended over the past 12 months. The credit extended to corporates on a cumulative 12-month basis has increased from N$509 million in May 2018 to N$4.13 billion. While credit extended to individuals has been rather stagnant, down 9% on a rolling 12-month basis to N$3.52 billion.

However, PSCE growth in May stemmed from the use of short-term debt as the other loans and advances category grew by 12.4% y/y for corporates and 23.9% y/y for individuals. Due to the nature of debt used, this further questions the utilisation of the credit extended and the probability that such debt is not being used to fund capital expenditures or for long-term productive use.

Building Plans – May 2019

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A total of 159 building plans were approved by the City of Windhoek in May, 11 less than in April. N$81.3 million worth of plans were approved in May as opposed to N$169.0 million in April. A total of 71 building plans were completed during the month with a value of N$142.5 million. Year-to-date, N$824.8 million worth of building plans have been approved, 26.1% more in value than during the corresponding period in 2018. On a twelve-month cumulative basis, 2,198 building plans have been approved worth approximately N$2.01 billion, 19.4% higher in value terms than cumulative approvals in May 2018.

116 additions to properties were approved in May with a value of N$34.1 million, a drop of 42.5% m/m and 54.5% y/y. Year-to-date 643 additions to properties have been approved with a total value of N$334.2 million, an increase of 8.8% y/y in number but a decrease of 25.2% y/y in value terms. On a 12-month cumulative basis the number of additions approved has increased by 4.4% y/y while declining by 29.7% y/y in value terms. We are seeing more additions to properties being approved but with a lower overall value being added.  Year-to-date 175 additions have been completed with a combined value of N$99.6 million, down 78.9% y/y in number and 60.1% y/y in value terms.

New residential units accounted for 42 of the approvals registered in May, an increase of 31.3% m/m and 13.5% y/y. In value terms, N$45.9 million worth of residential units were approved in May, up 36.0% m/m but down 7.7% y/y. Year-to-date residential unit approvals have increased by 22.6% y/y in number and 87.2% y/y in value. On a 12-month cumulative basis the rebound in residential units has been even more impressive, recording a 77.7% y/y increase in number of approvals and a 98.6% y/y increase in value. While the magnitude of the growth in number and value of approvals is largely due to base effects it is worth noting that, in value terms, one would have to go back to early 2014 to find a higher value for approvals of flats and houses, not adjusting for inflation. As building plan approvals are a leading indicator it points to increasing construction activity going forward, albeit in the residential space.

Only 1 new commercial unit, valued at N$1.3 million, was approved in May, bringing the year-to-date number of commercial and industrial approvals to 15, worth a total of N$169.7 million. This is 11.8% down in number from May last year, but 373.3% up in value terms. On a rolling 12-month basis the number of commercial and industrial approvals have slowed to 41 units worth N$514.1 million as at May. This is a decrease of 19.6% y/y in number but an increase of 182.7% y/y in value. Unlike the strong performance seen in residential approvals, the performance in value terms over last year in the commercial and industrial space is attributable to base effects. In nominal terms the value of commercial and industrial approvals is still less on a rolling 12-month basis than in any year after 2011. The value of industrial and commercial developments is thus also picking up when compared to last May last year.

In the last 12 months 2,198 building plans worth N$2.01 billion have been approved, increasing by 14.7% y/y in terms of number of approvals and 19.4% y/y in terms of value. The total value of plans approved is 22.9% down from the peak in March 2013, as seen in the above figure. Should we adjust this figure for inflation we see that the value of plans approved is down over 42% from the peak in April 2013. Thus, while cumulative approvals have been increasing in number and value terms when compared to a year ago, construction activity in the Windhoek municipal area is very much subdued by historical standards.