Business’ overall credit appetite still weak

Overdraft facilities to businesses in Namibia grew by more than N$900 million in the year ended 30 June 2023 to nearly N$10.7 billion, an annual increase of 9.4%.

Commenting on the latest figures by the Bank of Namibia, Cirrus Capital described the growth in overdraft credit as positive.

“This stems from increased demand from corporates in the services and manufacturing sectors, tied to working capital needs,” Cirrus said.

Overall business credit extension, however, remained weak, the analysts said, adding that June registered the third consecutive year-on-year (y/y) contraction. The negative growth recorded in the month under review also was the fourth contraction measured so far this year.

“The weak business credit uptake is in contrast to a material improvement in domestic sentiment and an uptick in corporate finance activity throughout the country. These signs suggest that we should see improvement in business credit growth, however that will only be somewhat later in this cycle, as Namibia is still in the relatively early stages of the growth cycle,” Cirrus said.

Corporate vs households

BoN data shows overall business credit registered growth of -0.8% y/y in April this year, followed by -3.4% the next month and -0.1% in June.

By the end of June this year, businesses owed local commercial banks N$45.78 billion in total, about N$61.4 million less than the comparative month in 2022.

By comparison, overall credit extended to households increased by 5.3% y/y in June, while total private sector credit extended (PSCE) – money lend to businesses and individuals – grew by 2.9% y/y.

Total PSCE at the end of June stood at nearly N$119.2 billion, about N$3.3 billion more than the same month last year.

Categories

Contractions of 5.9% y/y and 4.2% y/y were recorded for mortgage loans, as well as other loans and advances, respectively.

At the end of June, corporates owed commercial banks around N$14.1 billion in mortgage loans, down N$881.4 million y/y/.

“The decline in business mortgage loans likely stems from impairments during the second half of 2022, particularly as one banking institution now holds some properties in its possession,” Cirrus said.

Other loans and advances, which include credit card debt and personal loans, totalled about N$16.4 billion – nearly N$716 million less than June 2022.

“While businesses were net re-payers of other loans and advances y/y, there was m/m [month-on-month] growth of 1.3%, as businesses are less reliant on these forms of short-term credit,” Cirrus said.

Vehicles

Instalment and leasing credit increased from nearly N$3.95 billion in June 2022 to some N$4.57 billion.

Cirrus attributed this “notable growth” of 15.7% y/y to businesses continuing to expand their vehicle fleet – “particularly those in the rental (tourism), mining, and logistics (freight) sectors”.

“New vehicle sales experienced a significant boost, reaching 1 320 units in June 2023. This represents impressive y/y growth of 52.4% and a substantial m/m increase of 34.4%. These figures mark the highest number of units sold since Jul 2017,” Cirrus said.

The analysts continued: “The uptake in commercial vehicle sales is particularly encouraging for economic growth. As companies expand their existing fleets or replace aged ones, especially in mining and logistics sectors, this indicates a positive trajectory for economic development.

“It showcases businesses' confidence in the future and their readiness to invest in their operations despite the prevailing economic challenges.”