Vehicle sales pick up as household debt increases

Simonis Storm Securities has indicated that Namibian new vehicle sales increased in January breaking a trending decline witnessed in the 2017 business calendar.

Statistics provided by the brokerage firm’s junior analyst, Indileni Nanghonga, indicate that the sales ticked up by 5.5% month on moth to 881 units in January 2018.

Says the analyst, “On annual basis, vehicle sales declined by 3.2% in January compared to a 34.5% contraction in the prior year.”

Meanwhile, the slight increase during the month of January was observed in passenger, light commercial and medium commercial vehicles categories to 427, 427 and 14 units compared to 372, 402 and 11 units in the prior month.

Nanghonga also submits that the slight increase in the monthly vehicle sales can be attributed to the new models in the market such as the Yaris.

However, the decline in vehicle sales was heralded last year by central bank governor, Iipumbu Shiimi, as constructive enough to put tapes over expenditure that sees foreign currency flying out of the country.

He said this had negative effects on the country’s reverses, which are kept in foreign exchange.

On a yearly basis, vehicle sales have been in a negative territory over a prolonged period since July 2015.

At the present moment, Namibia’s official stock of international reserves are within positive territory standing at N$30.2 billion which represents an increase both on a monthly and annual basis.

Shiimi said at that level, the reserves are estimated to cover 4.7 months of imports of goods and services. 

However, despite the realised uptick, Simonis Storm Securities say it is too early to blow the trumpet as the recessionary period will pinch the motor industry. 

“Overall, the tough economic environment is expected to continue in 2018 and this will continue to be a drag on the motor vehicle industry. We continue to expect vehicle sales to be muted over the short to medium term,” says Nanghonga.

She also indicated that, in addition, household debt increased by 242.2% since 2005, reflecting the high level of debt incurred by the consumer.

Consumer activist Milton Shaanika Louw, speaking to this publication last year also decried household borrowing levels as unsustainable. 

“We are using overdrafts for day to day expenses. Now when the interest rates come down, the problem is, are we going for more overdrafts using the money and paying less money for more money? It just means we are going to be higher in debt, and that’s one of the biggest problems we have to look at,” he told The Villager in an exclusive engagement.