South Africa's Reserve Bank has for some time raised the alarm about the inflationary risks posed by a boom in credit, but some analysts say increasing borrowing by businesses may bode well for the economy.

Economists say a marked growth in credit to South Africa's private sector in recent months may even help the country tackle its huge unemployment rate, provided the money is ploughed into much-needed investment in local industries.

Nico Kelder, an economist at Efficient Research, said much of that was likely to have had headed into manufacturing -- a sector vital for its ability to absorb a large pool of unskilled labour.

Also, any boost to manufacturing could eventually herald an important structural change in the economy by lessening South Africa's dependence on imports and reversing a massive trade imbalance.

"Most of the strong rate of increase we've seen ... is going to investment ... The most important part is it creates capacity in the economy, it creates wealth," Kelder said.

"We are changing from a short-term, very good economy to a more stable path. Inflation is stable, interest rates are stable, growth is stable. That is what businesses want -- certainty."

Private sector credit extension overall grew by 25,8% year-on-year in December after it vaulted to a record high of 27,48% in October. Reserve Bank governor Tito Mboweni has described banking lending as "madness".

But analysts point out that consumers are not the only ones clamouring for credit. So, too, are businesses.

Other loans and advances, the category that normally covers corporates, outpaced all lending and grew by 30,9% in December -- a good omen for Africa's biggest economy, which has suffered from a lack of investment in the post-apartheid era.
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