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Other Articles from The Villager

Meager capital expenditure pinch building initiatives … as tight fiscus sees a decline in vehicle sales

17/11/2017
by Kelvin Chiringa
Business

Government’s meager capital expenditure has seen a plunge in the number of building initiatives while fiscal consolidation measures have slowed down vehicle sales in the local economy. 

Simonis Storm Securities have pointed out that the decline in the value of building plans can also be ascribed to higher unemployment and slow income growth coupled with low consumer and business confidence. 

Meanwhile, the Namibia Statistics Agency (NSA) data shows that youth unemployment rate stands at 43.4 percent for those in the 15 to 34-year-old age bracket while the overall unemployment rate stands at 34 percent.

The number of building plans approved within the Windhoek municipal area in October 2017 contracted by 12.5% YTD to 1 873 units, compared to a contraction of 23.2% YTD in the prior year.

On a monthly basis, building plans approved increased by 101.1% compared to a 52.5% contraction in the prior month. 

In addition, the number of buildings completed also contracted by 8.1% Year-to-date (YTD) to 410 units compared to a contraction of 18.9% YTD in the prior year.

“We do note that Government has allocated less money to capital expenditure and this will continue to drag on building initiatives,” trainee economist Indileni Nanghonga says. 

She adds, “In monetary terms, the value of buildings completed continues to contract by 19.9% YTD to N$397.0 million in October 2017, compared to a growth rate of 0.3% YTD in the prior year.” 

Meanwhile, Simonis Storm has observed that Namibian Vehicle sales contracted by 5.4% m-o-m to 1 100 units in October 2017.

On an annual basis, vehicles sales improved, recording a contraction of 4.9% in October compared to a 34.5% contraction in the prior year, the brokerage firm says. 

“We believe that the annual growth recovery is mainly due to the base effects as vehicle sales started its downward trend since end of 2015,” Nanghonga says. 

She adds, “Our interesting observation on what is keeping vehicle sales floating is partly the observed growth in the tourism industry coupled with demand for new models (Hilux and Fortuner) in the market.”

The Government, considered to be the main player (buyer) in this industry has committed itself to fiscal consolidation and this put severe pressure on motor vehicle dealerships, she notes. 

Simonis Storm has also pointed at slow business and consumer confidence as pushing the continuous decline in vehicle sales.

“This is evident in the PSCE numbers that are at record lows of 5.4% at the end of September 2017. We reckon that another rate cut will give leeway to the depressed industry although the recovery will be recognized slowly,” she says.

Furthermore, the 10% required deposit is, amongst others, putting pressure on already distressed consumers. 

“We do not expect a significant turn-around in the vehicles sales numbers over the medium term. Our view is based on a prolonged recession and slowing PSCE,” notes Nanghonga. 

Simonis Storm says aggregate suggested retail prices increased by 9.9% m-o-m in October to N$0.5bn compared to N$0.4bn in the prior month. 

On an annual basis, the suggested retail price increased by 1.8%. The monthly increase can be attributed to 8 Heavy Commercial Vehicle sales during October 2017 compared to 2 units in the prior month. 

The slight increase in Heavy and Medium Commercial Vehicles may suggest an improvement in economic activity by the Mining Sector.