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South Africa's macroeconomy does not have a credit bubble in the wake of the recession, economist Roelof Botha said on Wednesday.
"Our study indicated there is no credit bubble," he said in Johannesburg, presenting a study commissioned by short-term credit company Wonga.com South Africa.
A "credit bubble" involves a situation where credit has grown faster than the economy can handle it, creating a bubble. When the bubble bursts, this can have negative consequences for the economy.
Botha, of the Gordon Institute of Business Science, and Ilse Botha, of the University of Johannesburg, conducted the study with the aim of clarifying the role of unsecured lending in stimulating key demand components.
The study also looked at how unsecured lending could have helped grow the economy since the recession.
"[The study] illustrates just how essential credit has been, and continues to be, for economic growth," Botha said.
Small, medium and micro enterprises often used unsecured lending as working capital to keep their businesses afloat. This in turn could stimulate job creation.
Total mortgage loans fell from almost R1.2-trillion in 2010 to just below R1.1-trillion this year, while other loans grew from R700-billion to R900-billion.
"Post-recession, if unsecured lending had grown at the same rate as the gross domestic product, the economy would have been R219-billion smaller in mid-2013," Botha said.
This would have been exacerbated if unsecured lending had grown at the same rate as total private sector credit, and the economy would have been R395-billion smaller, which would mean South Africa would still be in a recession.
"Right now, however, there is simply not enough growth for a credit bubble to exist."
Wonga.com South Africa CEO Kevin Hurwitz said the company commissioned the research because of debate about the relatively high growth rates for unsecured lending.
"The research confirms our belief that the real debate in South Africa should be about ensuring credit providers are responsible, transparent and legally compliant."
However, credit providers should be ethical as well as compliant, Hurwitz said.
"The fact that the research shows there is no credit bubble doesn't mean that we should become complacent about our responsibility towards our consumers."
Irresponsible or inappropriate lending standards, often by banks, were one of the possible causes of credit bubbles.
Botha said South Africa was ranked third best out of 148 countries for consumer credit, excluding retailers which accounted for about 2.5% of the outstanding consumer credit market.
"It is utter nonsense that South Africa is on the verge of economic collapse," Botha said.