Business bleeding red ink
Other loans and advances to businesses, which include credit card debt, in January rose by 21.3% year-on-year to total nearly N$8.7 billion.
Phillepus Uusiku – The business sector in Namibia had to borrow nearly N$2.25 billion in personal loans, advances and overdrafts in January, driving its total commercial debt up by more than N$3 billion in one month.
This is the biggest increase in corporate debt on a monthly basis since January 2007, IJG Securities says in their analysis of the latest Bank of Namibia (BoN) data.
“January’s PSCE [private sector credit extension] data shows that businesses continue to be dependent on short-term debt, particularly in the form of overdrafts and credit card debt,” IJG says.
The sector’s reliance on short-term debt is concerning, the analysts say. However, it is not unexpected, given the fact that Namibia remains in an economic slump, IJG adds.
At the end of January, corporates’ total debt stood at nearly N$44.5 billion, 7.5% more than a year ago.
Other loans and advances, which include credit card debt, rose by 21.3% year-on-year to total nearly N$8.7 billion. In January 2019, the figure was about N$7.1 billion. Overdrafts grew by 0.4% year-on-year and totalled nearly N$10.4 billion.
Average growth
Commenting on the January data, Simonis Storm (SS) say business demand for credit was mainly seen in the manufacturing, information and communication, as well as the transport and storage sectors. Increases in agricultural production, due to good rainfall, should benefit food manufacturers and in turn the logistics sector, SS says.
Annual growth in credit extension in the beginning of 2020 is significantly slower than the 13.6% year-on-year growth recorded last January, SS points out.
This, however, does not mean that credit to businesses is not increasing, but rather increasing at a decreasing rate compared to the previous period.
“Although increasing at a slower pace when compared to the same period last year, the growth is better than the 5.8% average growth seen over the last 6 months. The increase emanated from an upsurge of 21.3% year-on-year growth in credit through other loans and advances,” SS says.
Mortgage loans increased at a slower pace of 2.1% year-on-year compared to a 3.5% in December 2019. Meanwhile, instalment credit further contracted by 3.3%, SS added.
Appetite
Comparing business demand for credit with that of households, businesses showed more borrowing appetite with household borrowing increasing by 7.0% to N$58.7 billion in January 2020 – higher compared to a 2.2% growth in the prior year.
“Appetite for credit started off on an upward trajectory in 2020 especially in the business sector, but it’s too early to tell whether the trend is sustainable given the mounting fear and trade threat caused by COVID-19,” SS says.
Overall PSCE registered growth of 7.3% year-on-year in January, higher than the 6.8% registered in December.
This is the biggest increase in corporate debt on a monthly basis since January 2007, IJG Securities says in their analysis of the latest Bank of Namibia (BoN) data.
“January’s PSCE [private sector credit extension] data shows that businesses continue to be dependent on short-term debt, particularly in the form of overdrafts and credit card debt,” IJG says.
The sector’s reliance on short-term debt is concerning, the analysts say. However, it is not unexpected, given the fact that Namibia remains in an economic slump, IJG adds.
At the end of January, corporates’ total debt stood at nearly N$44.5 billion, 7.5% more than a year ago.
Other loans and advances, which include credit card debt, rose by 21.3% year-on-year to total nearly N$8.7 billion. In January 2019, the figure was about N$7.1 billion. Overdrafts grew by 0.4% year-on-year and totalled nearly N$10.4 billion.
Average growth
Commenting on the January data, Simonis Storm (SS) say business demand for credit was mainly seen in the manufacturing, information and communication, as well as the transport and storage sectors. Increases in agricultural production, due to good rainfall, should benefit food manufacturers and in turn the logistics sector, SS says.
Annual growth in credit extension in the beginning of 2020 is significantly slower than the 13.6% year-on-year growth recorded last January, SS points out.
This, however, does not mean that credit to businesses is not increasing, but rather increasing at a decreasing rate compared to the previous period.
“Although increasing at a slower pace when compared to the same period last year, the growth is better than the 5.8% average growth seen over the last 6 months. The increase emanated from an upsurge of 21.3% year-on-year growth in credit through other loans and advances,” SS says.
Mortgage loans increased at a slower pace of 2.1% year-on-year compared to a 3.5% in December 2019. Meanwhile, instalment credit further contracted by 3.3%, SS added.
Appetite
Comparing business demand for credit with that of households, businesses showed more borrowing appetite with household borrowing increasing by 7.0% to N$58.7 billion in January 2020 – higher compared to a 2.2% growth in the prior year.
“Appetite for credit started off on an upward trajectory in 2020 especially in the business sector, but it’s too early to tell whether the trend is sustainable given the mounting fear and trade threat caused by COVID-19,” SS says.
Overall PSCE registered growth of 7.3% year-on-year in January, higher than the 6.8% registered in December.
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