By Megameno Shikwambi
The National Association of Automobile Manufacturers South Africa (NAAMSA), released Namibia’s new vehicle sales numbers for October 2019 which shows that sales increased to a four-month high of 971 units in October 2019.
This is a 20.5% monthly and a 6.5% annual increase, respectively.
Analyst at Simonis Storm, Indileni Nanghonga said that despite depressed consumer spending, low borrowing appetite, and dejected business conditions, they believe that the Black Friday re-stocking and the upcoming election had an upward influence on the imports of new vehicles.
Black Friday is due in a few days’ time and a number of car-sales have cut prices for vehicles.
Latest statistics captured in the Simonis Storm report shows that out of 10-months in 2019, Passenger vehicles only recorded 2-months of positive annual growth.
This brings the average decline to 8.5% in 2019.
The same trend can be seen in the light commercial vehicles, declining on average by 14.0% in 2019.
Passenger- and light commercial vehicles make up about 92% of total vehicle sales.
Toyota continues to dominate the light commercial vehicle space with a 60% share of the total light commercial vehicles. Toyota alone added 322 units (LCV) in October which is a 32.3% increase compared to the prior month
“The current dire economic environment, depressed consumers, end of tourism peak period coupled with low demand across the spectrum, do not support the current tick up in October’s new vehicle sales. Francis of Assisi once said that “all the darkness in the world cannot extinguish the light of a single candle.” We cautious that a mere wind can blow it out.
We believe that the current injection of new vehicles sales is partially attributed to dealerships stocking up for “Black Friday” special combined with the Namibia election to be held on the 27th of November 2019.
Although the increase was moderate, it was the highest in four months.
Despite the positive growth in October 2019, we believe that low growth and stifled consumer financial position do not bode well for future prospects in the vehicle industry.
We do not expect strong sales over the medium term and this could be the new normal for a long time (4 years +),” said the firm.
Total new vehicles sales declined by 11.7% to 8 812 units ytd ending October compared to 9 979 units same time last year.
“We reiterate our annual (2019) forecast of 11 035 units, a 7.3% contraction and price in a worst-case scenario of a 13.5% decline in overall vehicle sales to 10 300 units,” said Nanghonga.
Looking at our neighbouring country, SA, new vehicle sales increased to 51 978 units, reflecting a marginal increase of 122 units or 0.2% compared to 51 856 vehicles sold in October last year.
“The car rental industry continued to provide substantial support to new vehicle sales while, monthly export sales also registered a further solid performance in line with market expectations,” said Indileni Nanghonga.
The bleak prospects in the vehicle sales reflect an overheating economy and experts at Simonis Storm have said that the future of the Namibian economy remains bleak.
The Gross Domestic Product is only expected to pick up in 2020, weak domestic revenue and rising youth unemployment, the firm said.
Escalating debt levels remain a concern, especially in a low growth environment.
We are concerned about the government’s ability to redeem debt (foreign bonds) and the possible downward revision of the SACU revenue in 2020 as the bloc experience slow economic growth.
On the 1st of October 2019, Fitch Ratings agency downgraded Namibia’s Long-Term Foreign-Currency Issuer Default Rating (IDR) to ‘BB’ from ‘BB+’, with a Stable outlook, bringing Namibia’s rating two notches below investment grade.
What could still go wrong?
Fitch highlighted the deterioration in economic growth and fiscal metrics.
“The macroeconomic environment has worsened further and Fitch has lowered its assessment of Namibia’s growth potential.
Subdued economic prospects amid exceptionally elevated inequality and high unemployment will raise significant challenges for the government’s plan to stabilise its debt by cutting back spending, particularly on high payroll costs.
Fitch now expects the economy to contract by 1.2% in 2019 vs SS projection of -1.1% for the same period,” said Simonis Storm experts.