Household sector appetite drives credit uptake

Simonis Storm Securities
Simonis Storm Securities

Houshold debt escalated to N$66,8 billion in December 2023, up from N$64,7 billion in December 2022, while corporate debt also saw a marginal increase, reaching N$45,9 billion in December 2023, compared to N$45,8 billion in the previous year.

According to economic analysts Simonis Storm Securities, in addition to this, non-resident debt rose to N$7,9 billion from N$7,6 billion over the same period.

Simonis says in the third quarter of 2023, the financial services sector in Namibia witnessed a revival registering 3,7% year-on-year (y/y) increase.

“This marks a recovery from the contraction of 4,9% and 2,6% seen in the first and second quarters of 2023, respectively.

The rebound observed in the third quarter can primarily be attributed to performance in the banking and insurance subsectors, as reported by the Namibia Statistics Agency,” say the analysts.

In 2023, the private sector’s credit uptake in Namibia averaged 2,4%, 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% 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. According to Simonis, this shift in borrowing patterns has led to an increase in the overall debt stock.

The deceleration of corporate credit growth in Namibia was evident in December 2023, registering at just 0,4% y/y, 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.

“This slowdown was 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,” said Simonis.

On a brighter note, the analysts noted that the instalment and leasing category within corporate credit exhibited strong performance, recording a 21,6% y/y growth.

Household credit extension, while remaining a pivotal component in the growth of private sector credit extension (PSCE), witnessed a deceleration to 3% y/y in December 2023, down from 3,2% y/y in November 2023 and 4,7% y/y in December 2022.

This rate represents the slowest credit growth uptake observed throughout 2023.

The tempered growth is primarily due to a subdued demand in the other loans and advances category, which only saw a marginal increase of 0,2% y/y in December 2023.

However, household overdraft credit uptake in December 2023 reached 14,7% y/y, one of the highest levels recorded in the year.

In non-resident debt, both foreign individuals and firms exhibited an increase in credit uptake, registering growth of 3,6% 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 actors 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.

As of December 2023, the liquidity position of Namibia’s banking industry showed signs of improvement.

The industry’s cash balances increased to N$7,7 billion, up from N$5,9 billion in November 2023.
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