A shift in domestic borrowing patterns has led to an increase in the overall debt stock. This has resulted in household debt escalating to N$66.8 billion in December 2023, up from N$64.7 billion in December 2022. Corporate debt increased marginally, reaching N$45.9 billion in December 2023, compared to N$45.8 billion during the previous year.
Stock brokerage Simonis Storm (SS) stated that the private sector’s credit uptake in Namibia during 2023 averaged 2.4%, which is a decrease from the 3.6% observed in 2022.
“This trend is further highlighted by the data from December 2023, which saw credit growth of 2.0% year-on-year (y/y), slightly lower than the 2.1% y/y recorded in November 2023, and lower than the 4.2% y/y in December 2022. The credit uptake throughout 2023 was mainly driven by the household sector, which averaged a growth rate of 4.7% y/y. In contrast, the corporate sector (businesses) experienced a decline, averaging -0.7% y/y in the same period,” the most recent SS report reads.
SS continued that the deceleration of corporate credit growth in Namibia was evident in December 2023, registering at just 0.4% y/y, which is a slowdown from the 3.5% y/y growth seen in December 2022, and a slight decrease from the 0.7% y/y recorded in November 2023.
SS stated: “The reason for this slowdown is primarily driven by reduced demand and increased repayments by corporates in sectors such as mining, services, wholesale and retail trade, and agriculture. A detailed look into the various corporate credit categories reveals a continued negative growth in mortgage loans, other loans and advances, and overdrafts during December 2023. On a brighter note, the instalment and leasing category within corporate credit exhibited strong performance, recording a 21.6% y/y growth”.
Meanwhile, during the third quarter of 2023, the domestic financial services’ sector witnessed a revival, registering a 3.7% y/y increase. SS noted this marks a recovery from the contraction of 4.9% and 2.6% seen in the first and second quarters of 2023, respectively.
The Namibia Statistics Agency (NSA) reported that the rebound in the third quarter can primarily be attributed to performance in the banking and insurance sub-sectors.
In comparison, South Africa’s Private Sector Credit Extension (PSCE) experienced a growth of 0.9% month-on-month (m/m) at the end of the fourth quarter, translating to a 4.9% annual increase, surpassing the previous year’s 3.8%. SS pointed out this growth, driven by the corporate sector, exceeded Bloomberg’s consensus expectations of a 4.1% y/y increase.
Dissecting these latest figures, SS noted that “while both Namibia and South Africa are experiencing unique economic and financial dynamics, the comparison reveals parallel challenges and trends, particularly in the context of subdued business confidence and the impact of external economic pressures. This comparative analysis provides a broader perspective on the regional economic climate, which is essential for understanding the potential future trajectory of monetary policies and credit markets in both countries”.
An SS analysis of current monetary policy trends indicates the brokerage anticipates the Bank of Namibia will likely implement its initial rate reduction in the latter half of 2024 for consumers to start seeing an improvement in private sector credit extension for the year.
“This anticipated policy adjustment is expected to positively influence private sector credit extension throughout the year,” SS stated. The brokerage added that the growth in corporate credit uptake, particularly in the unsecured general loans and advances’ segment, indicates a robust credit market in South Africa, contrasting with the more conservative approach observed in Namibia.
Moreover, Namibia’s non-resident debt rose to N$7.9 billion from N$7.6 billion over the same period. Non-resident debt, both foreign individuals and firms, exhibited an increase in credit uptake, registering a growth of 3.6% year-on-year (y/y) in December 2023, a rise from 0.7% y/y in November 2023. This is in line with foreign direct investments recorded in 2023, and factors such as ongoing mining explorations, extension of mine operation lifespans, pilot green hydrogen projects, the resumption of production activities in mines, and investments in green hydrogen and other renewable energy projects can all be attributed to the positive trend in non-resident credit uptake.
SS further pointed out that as of December 2023, Namibia’s banking industry’s liquidity position showed signs of improvement.
“The industry’s cash balances increased to N$7.7 billion, up from N$5.9 billion in November 2023. This increase can be attributed to factors including diamond sales and corporate tax payments.
Additionally, the central bank’s international reserves experienced an 8.4% m/m increase, primarily due to higher inflows into commercial banks, largely as a result of diamond sales and customer foreign currency placements (CFCs), as reported by the Bank of Namibia (BoN),” SS stated.