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THERE has been high demand for credit – specifically corporate credit – which is mainly driven by businesses in the mining and services sector, the Bank of Namibia (BoN) says.
According to analysts Simonis Storm Securities, credit extended to the private sector grew by 4,6% year on year in August 2022, compared to 4,% year on year in July this year.
Credit uptake by corporates – which make up 32% of total credit extended – grew by 8,2% year on year in August 2022, compared to 6,4% year on year in the prior month, whereas household credit uptake increased by 2% year on year in August 2022, compared to 2,2% year on year in the prior month.
“Other loans and advances rose 19,4% year on year, and instalment credit went up 14,9% year on year. These were the biggest contributors to corporate uptake, whereas other loans and advances went up 6,2% year on year, and mortgages rose 1,7%, driving household credit uptake higher,” Simonis says.
Instalment credit growth is consistent with the double digit increase rising 37,9% year on year and 55,2% month on month in new vehicles sold in August 2022.
According to the researchers, economic growth rates during 2022 in South Africa have been coming in lower than in Namibia, facing flooding at key ports, theft and vandalism of railway infrastructure for scrap metal sales, and severe load-shedding.
Yet credit growth in South Africa has persistently come in higher than credit growth rates in Namibia.
It could be due to better economic prospects in South Africa, a higher demand for credit than in Namibia, or that Namibian banks are more risk averse.
Based on the latest quarterly data release, private consumption expenditure grew at a faster pace in the first half of 2022 than during the same period last year, despite growth in household credit trending down, Simonis says.
“This could signal an increase in cash-based transactions, where we have indicated a N$13 billion payout from life insurance companies in the last two years in previous reports.
“On the other hand, net investment in the economy has improved during the first half of 2022 at the same time the pace in corporate credit growth has increased.
“However, we once again observed that credit growth for both households and corporates exceeded economic growth rates for most of the period from the first quarter of 2015 to the last quarter of 2021,” Simonis says.
Despite perceived risk aversion among banks, Simonis says it remains concerning that the data seems to suggest most credit extensions are used to finance consumption expenditure instead of financing productive investments.
“This could, however, change as we move closer to 2026, a crucial time where green hydrogen and oil projects are expected to show more tangible developments,” the researchers say.
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