Category Archives: Economic Research

Economic Research

PSCE – December 2019

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Overall

Private sector credit (PSCE) increased by N$1.24 billion or 1.2% m/m in December, bringing the cumulative credit outstanding at the end of 2019 to N$103.7 billion. On a year-on-year basis, private sector credit increased by 6.9% in December, increasing at a quicker rate than the 5.9% recorded in November. From a rolling 12-month basis, N$6.7 billion worth of credit was extended to the private sector, compared to the previous year, the rolling 12-month issuance is down 1.4% from the N$6.8 billion issuance observed by the end of December 2018. Of this cumulative issuance, individuals took up the lion’s share of credit, amassing N$4.1 billion worth of debt while N$2.8 billion was extended to businesses. The non-resident private sector decreased their borrowings by N$170 million.

Credit Extension to Individuals

Credit extended to individuals increased by 7.2% y/y in December, compared to 6.6% y/y recorded in November. On a monthly basis, household credit increased by 1.2%, double the pace of the 0.6% growth registered in November. Most of this growth stemmed from an increase in ‘Other loans and advances’ of 5.8% m/m and 32.0% y/y in December. This relatively quick pace can likely be explained by consumers making use of credit cards and payday loans to purchase gifts and pay for travel expenses over the holiday period. Installment credit continued to contract, by 0.1% m/m and 6.0% y/y. Mortgage loans extended to individuals grew by 0.7% m/m and 5.9% y/y, compared to 0.2% m/m and 5.7% y/y in November.

Credit Extension to Corporates

Credit extension to corporates grew by 1.1% m/m and 7.1% y/y in December, following a slow increase of 0.4% m/m and 5.7% in November. On a rolling 12-month basis N$2.76 billion was extended to corporates in 2019, an increase of 17.3% y/y from the N$2.35 billion that was extended to corporates in 2018.  Installment credit extended to corporates, which has been contracting on an annual basis since February 2017 remained depressed, contracting by 0.9% m/m and 4.1% y/y in December. Leasing transactions to corporations grew by 1.1 m/m, but declined by 31.7% y/y. Overdraft facilities extended to corporates increased by 3.0% m/m and 1.9% y/y.

Banking Sector Liquidity

The overall liquidity position of commercial banks deteriorated significantly during December, declining by N$858.3 million to reach an average of N$982.7 million. Bank of Namibia attributed the decline in liquidity to corporate tax payments during December as well as a high uptake of treasury bills and other liquid assets by commercial banks. The relatively low liquidity position has prompted commercial banks to utilize the BoN’s repo facility, with the balance of repo’s outstanding increasing from N$284.7 million at the start of December to N$1.75 billion at the end of the month.

Reserves and Money Supply

As per the BoN’s latest money statistics release, broad money supply rose by N$11.0 billion or 10.5% y/y in December, following a 10.6% y/y increase in November. Foreign reserve balances fell by 3.0% m/m to N$28.8 billion in December. The BoN again stated that the decline was due to the net purchases of South African Rands by commercial banks for import payments coupled with increasing government foreign payments during the month under review.

Outlook

Private sector credit growth figures for 2019 remained largely in the same 6-7% y/y range as in 2018. The rolling 12-month issuance of N$6.7 billion is however down 1.4% from the N$6.8 billion issuance recorded at the end of 2018.

The SARB’s MPC surprised markets with a unanimous decision to cut the repo rate by 25-basis points to 6.25% at its meeting in January. We expect the BoN’s MPC to follow the SARB’s decision at its next meeting later in February, as Namibian inflation figures are trending at very low levels and economic growth is stagnating. Policy changes (and policy certainty) to attract foreign investment will at this moment likely be more effective to revive economic activity than more accommodative monetary policy, although a 25-basis point rate cut should provide some relief to heavily indebted consumers.

New Vehicle Sales – December 2019

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714 New vehicles were sold in December, down 18.4% m/m from the 875 vehicles sold in November, and a decrease of 2.2% y/y from the 730 new vehicles sold in December 2018. Year-to-date 10,401 vehicles have been sold, a 12.6% contraction from December last year and the lowest annual vehicle sales figure since 2009. Of the 10,401 new vehicles sold during the year, 4,550 were passenger vehicles, 5,101 were light commercial vehicles, and were 750 medium and heavy commercial vehicles.

A total of 314 new passenger vehicles were sold during December, representing a 9.5% m/m contraction, but a 1.3% y/y increase. 4,550 passenger vehicles were sold in 2019, a 10.7% decline from 2018 and lower annual sales than the preceding nine years. Passenger vehicle sales made up 43.7% of the total number of new vehicles sold during 2019, broadly in line with the trend over the last 5 years.

Commercial vehicle sales declined to 400 units in December, a 24.2% m/m, and 4.8% y/y contraction. During the month 335 light commercial vehicles, 21 medium commercial vehicles, and 44 heavy commercial vehicles were sold. On a year-on-year basis, light commercial sales have declined by 12.3%, medium commercial vehicles rose by 90.9%, and heavy and extra heavy vehicle sales rose 37.5% y/y. On a twelve-month cumulative basis, light commercial vehicle sales dropped 17.1% y/y, while medium commercial vehicle sales rose 9.0% y/y, and heavy commercial vehicle sales rose 17.5% y/y.

Volkswagen lead the market for new passenger vehicle sales in 2019, claiming 30.5% of the market, followed by Toyota with a 28.3% share. They were followed by Kia and Mercedes at 5.8% and 5.5% respectively, while the rest of the passenger vehicle market was shared by several other competitors.

Toyota remained the leader in the commercial vehicle space in 2019 with 57.3% market share, with Nissan in second place with a 12.4% share. Ford and Isuzu claimed 9.3% and 7.6% respectively of the number of new light commercial vehicles sold for the year. Hino lead the medium commercial vehicle category with 39.8% of sales while Scania was number one in the heavy and extra-heavy commercial vehicle segment with 35.5% of the market share during the year.

The Bottom Line

New vehicle sales figures were quite dismal in 2019 with the cumulative number of new vehicles sales for the year amounting to 10,401, a decline of 12.6% from the cumulative number of vehicles sold in 2018 and a 54.1% contraction from the peak, on a cumulative 12-month basis, of 22,664 new vehicle sales recorded in April 2015. We expect new vehicle sales to remain under pressure in 2020 as there is little sign that the economy will show any meaningful growth. December new vehicle sales have historically been low when compared to most other months, but 2019’s December figure was the lowest since 2008, showing just how badly the ongoing recession has impacted demand and investment.