WINDHOEK – The huge penchant of Namibians for flashy, expensive things that they can hardly afford continues unabated with consumer debts standing at N$36.6 billion as of December 2013.
It is a situation that is likely to come to haunt those with debts if the central bank does indeed increase the interest rate, when the Monetary Policy Committee meets on February 19. The Bank of Namibia is already concerned with the high level of debt among households, for money borrowed to be used on non-productive purchases, and has started to implement stricter measures to curb debt levels. Even though the mortgage component is part of the increase in household debt, a closer inspection shows that instalment credit and other loans increased the most, while overdrafts remain high at N$7.89 billion. Instalment credit increased from N$7.79 billion to N$9 billion, while other loans sprang from N$9.2 billion to 11.76 billion, according to financial research firm Simonis Storm Securities.
Last month the Bank of Namibia said it is “concerned [with] the continued growth in instalment credit, particularly to individuals,” because “such credit extended tends to be non-productive and increases the debt burden and debt servicing costs of households.”
The central bank has said that it noted the bigger portion of instalment credit is mainly money borrowed for instalment financing, specifically for purchases of vehicles. To counter the increase in household debt the central bank has began with a review of the Credit Agreement Act, roping in the Ministry of Trade and Industry, in what it called “a targeted intervention in order to limit the growth in credit extension.” The Simonis Storm Security report says the annualised figures “have once again shown record highs in household debt numbers. With year-on-year growth of 15.18 percent, there are looming fears that the Namibian consumer is highly indebted, and will therefore have to brace [themselves] as the markets align towards a higher interest rate environment.” The firm says based on South Africa’s recent interest rate hike, it is anticipated that the Bank of Namibia will follow suite during the next Monetary Policy Committee meeting so as to maintain certain levels of capital flows.
“We anticipate a hike of at least 25 basis points as the central bank will want to stagger the repo rate increases so as mollify the overall impact on consumers and businesses,” the report said. At N$36.62 billion the household debt is higher than corporate debt that stands at N$22.68 billion and government debt that stands at N$29.33 billion.
Household debt increased by 15.18 percent, compared to an increase of 13.11 percent for corporate and 11.45 percent for government debt, when compared to the debt levels of 2012.
By Desie Heita