Category Archives: Economic Research

Economic Research

Building Plans – October 2019

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A total of 214 building plans were approved by the City of Windhoek in October. This is a 5.9% increase in the number of plans approved on a monthly basis when compared to the 202 building plans approved in September. The approvals were valued at N$134.7 million, a decrease of N$298 million or 68.8% compared to last month. The number of completions for the month of October stood at 244, valued at N$109.9 million. The year-to-date value of approved building plans currently stands at N$1.70 billion, 1.8% lower than at the end of October 2018. On a twelve-month cumulative basis 1,947 building plans worth approximately N$1.81 billion have been approved, a decrease of 14.5% y/y in number and a contraction of 9.8% in value terms over the prior 12-month period.

The largest portion of building plan approvals was once again made up of additions to properties. 179 additions to properties were approved in October, an 11.9% increase over the number of additions approved in September. Year-to-date 1,400 additions to properties have been approved with a cumulative value of N$656.5 million, a decline of 22.8% y/y in terms of value compared to the same period in 2018. Completed additions amounted to 215, valued at N$82.3 million, an increase of 4.4%% y/y in number but a contraction of 3.9% y/y in value. Year-to-date 1,028 additions have been completed to a value of N$477.3 million, a drop of 49.5% y/y in number and 31.7% y/y in value.

New residential units were the second largest contributor to the number of building plans approved with 31 approvals registered in October, compared to 35 in September. In value terms, N$47.8 million worth of residential units were approved in October, increases of 9.6% m/m and 8.4% y/y. 316 New residential units valued at N$489.8m were approved in the first ten months of 2019, 28.8% y/y less in number and 2.9% y/y less in value than during the corresponding period in 2018. 29 Residential units valued at N$27.6 million were completed in October bringing the year-to-date number to 254, up 323.3% y/y, and value to N$350.8 million, up 243.2% y/y.

Commercial and industrial building plans approved in October amounted to 4 units, worth N$9.6 million. The number of approvals for commercial and industrial properties has been languishing in single digit territory since September 2016 and has an average approval rate of less than 4 approvals per month over the last 12 months. On a 12-month cumulative basis, the number of commercial and industrial approvals has decreased by 10.4% y/y in October to 43 units, worth approximately N$557.7 million, an increase of 39.2% in value terms over the prior 12-month period. No commercial and industrial building plans were recorded as completed in October.

During the last 12 months, 1,947 building plans have been approved, decreasing by 14.5% y/y. These approvals were worth a combined N$1.81 billion, a decrease in value of 9.8% y/y. The number of building plans approved, on a cumulative 12-month basis, continued to contract over the last four months. The overall decrease in both number and value of cumulative plans approved is concerning as, even in nominal terms, this indicates a continuing decrease in construction activity in the capital. Low consumer and business confidence means that growth in construction activity will likely remain subdued over the short- to medium-term.

New Vehicle Sales – November 2019

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A total of 875 new vehicles were sold in November, a 9.9% m/m decrease from the 971 vehicles sold in October. Year-to-date 9,687 new vehicles have been sold, of which 4,236 were passenger vehicles, 4,766 were light commercial vehicles, and 685 were medium and heavy commercial vehicles. On a twelve-month cumulative basis, new vehicle sales continued its downward trend. 10,417 new vehicles were sold over the last twelve months, a 13.2% contraction from the previous twelve months.

347 new passenger vehicles were sold in November, contracting by 2.3 % m/m and 14.3% y/y. Year-to-date new passenger vehicle sales rose to 4,236 units, down 11.5% when compared to the year-to-date figure recorded in November 2018. Twelve-month cumulative passenger vehicle sales fell 11.8% y/y as the number of passenger vehicles sold continued to decline.

A total of 528 new commercial vehicles were sold in November, decreasing by 14.3% m/m and 33.3% y/y. Of the 528 new commercial vehicles sold in November, 467 were classified as light commercial vehicles, 29 as medium commercial vehicles and 32 as heavy or extra heavy commercial vehicles. 440 heavy vehicles were sold year-to-date, the highest sales figure for the period since November 2016. On a twelve-month cumulative basis light commercial vehicle sales dropped 16.6% y/y, while medium commercial vehicle sales and heavy commercial vehicles rose 6.2% y/y and 8.4% y/y, respectively.  For the seventh consecutive month, there has been an increase in the sale of heavy commercial vehicles on a twelve-month cumulative year-on-year basis. The steady increase in this category indicates improved demand for durable goods by businesses.

Volkswagen continues to lead the passenger vehicle sales segment with 30.4% of the segment sales year-to-date. Toyota remained in second place with 28.9% of the market-share as at the end of November. Kia, Mercedes, Hyundai and Ford each command around 5% of the market in the passenger vehicles segment, leaving the remaining 20.0% of the market to other brands.

Toyota retained a strong year-to-date market share of 57.7% in the light commercial vehicle segment and remains the market leader in the segment. Nissan remains in second position in the segment with 12.6% of the market, while Ford makes up third place with 8.6% of the year-to-date sales. Hino leads the medium commercial vehicle segment with 38.4% of sales year-to-date, while Scania was number one in the heavy- and extra-heavy commercial vehicle segment with 37.0% 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 13.2% from the same period in 2018. Both new commercial and new passenger vehicle sales are at their lowest year-to-date levels since 2009. However there has been an improvement in the demand for new medium and heavy commercial vehicles in 2019. This improvement has come off a very low base, but it suggests that the sectors of the economy that rely on these categories of vehicles may have turned the corner or bottomed out. However, we continue to expect business and consumer confidence to remain low and thus expect subdued demand for new vehicles going forward.

PSCE – October 2019

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Overall

Private sector credit (PSCE) increased by N$510.1 million or 0.5% m/m in October, bringing the cumulative credit outstanding to N$101.9 billion. PSCE grew at a slower pace of 6.14% y/y in October compared to 6.24% y/y in September. On a rolling 12-month basis N$5.89 billion worth of credit was extended to the private sector, down 16.0% y/y. Individuals took up N$3.79 billion while N$2.30 billion was extended to corporates, and the non-resident private sector decreased their borrowings by N$193.7 million.

Credit Extension to Individuals

Credit extended to individuals increased by 6.7% y/y in October, a slight slowdown from the 6.8% y/y growth recorded in September. Mortgage loans extended to individuals increased by 0.6% m/m and 6.5% y/y. Installment credit continued to contract, by 0.1% m/m and 6.1% y/y. Other loans and advances (which is made up of credit card debt, personal and term loans) grew by 2.0% m/m and 24.2% y/y in October. Household demand for overdraft facilities declined in October, contracting by 2.0% m/m, although rising by 8.6% y/y.

Credit Extension to Corporates

Credit extension to corporates grew by 0.3% m/m and 6.0% y/y. On a rolling 12-month basis N$2.30 billion was extended to corporates as at the end of October, a decrease of 9.1% y/y. Although the uptick in the general demand for credit by corporates over the last year seems positive, the biggest driver of the increase in credit extended to corporates was shorter-term debt. Overdraft facilities extended to corporates decreased by 0.6% m/m but rose 5.4% y/y, while other loans and advances to corporates increased by 1.3% m/m and 12.3% y/y. The increase in these categories indicates that businesses continue to rely on other short-term debt to keep the lights on. Mortgage loans by corporates contracted by 0.7% m/m but rose 5.8% y/y, while installment credit increased by 0.5% m/m, but contracted by 5.2% y/y.

Banking Sector Liquidity

The overall liquidity position of commercial banks declined by N$227.3 million in October to reach an average of N$2.77 billion. The Bank of Namibia attributed the decline in liquidity to lower domestic Government spending mainly due to lower economic activity coupled with higher foreign currency outflows as a result of import payments during October 2019.

Reserves and Money Supply

As per the BoN’s latest money statistics release, broad money supply rose by N$7.16 billion or 6.7% y/y in October, following an 8.3% y/y increase in September. Foreign reserve balances rose by N$203.6 million to N$32.47 billion in October from N$32.27 billion in September. According to the BoN, the increase was mostly due to an inflow of SACU receipts as well as lower government payments during the period under review.

Outlook

Private sector credit extension continues to languish, increasing by 6.14% y/y during October compared to the 6.24% y/y growth rate recorded in September. It has been 36 months since PSCE last recorded double digit growth on an annual basis. As expected, the 25-basis point rate cut in August has not resulted in higher demand for credit as consumers are already over-indebted. With low economic activity and lack of demand, growth opportunities for businesses remain limited.

As mentioned earlier, corporates continue to rely on short-term debt to keep the lights on instead of taking on longer-term credit to invest in capital projects to expand operations. We do not expect conditions to improve in the short- to medium-term.