Growth and pattern of energy consumption in South Africa- implications for economic growth
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Date
2015
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University of Zululand
Abstract
Energy is seen as an indispensable input in the aggregated production function. Apart from stimulating output, it also enhances the living standard of individuals. South Africa has implemented various energy policies in an attempt to improve energy supply.
This study examined the growth and pattern of energy consumption in South Africa and its implication for economic growth both at aggregated and disaggregated level using time series data for the period 1980-2012. The models were estimated using the Johansen Juselius cointegration test and vector error correction model (VECM).
Empirical findings revealed that there exists unidirectional causal relationship from economic growth (GDPGR) to aggregate energy consumption (ENYGR) and capital (CAPGR) in the long run but not in the short run. For the disaggregated energy consumption model, there exists a long run bidirectional causal relationship between economic growth and electricity consumption as well as between economic growth and oil consumption. The bidirectional causality indicates that they are complimentary and can drive each other. This implies that implementation of energy conservative policies may not hamper economic growth. For the sector wise model, there exists long run unidirectional causality from tertiary sector output to oil consumption, while In the case of the primary and secondary sectors, there exists a long run unidirectional causal relationship running from economic output to oil consumption, as well as electricity consumption.
It is established that South Africa is an energy dependent economy, and that energy (especially electricity and oil) is a limiting factor of growth. Output growth is significantly outpacing energy supply, which has necessitated load shedding. An unreliable electricity supply is detrimental to the economy especially the service and manufacturing sectors which are large contributors to growth and employment generation. There is therefore need to increased investment especially in the electricity sector as well as strategic steps to increase crude oil production. In the long run, measures should be put in place to increase electricity generation capacity in order to meet growing future electricity demands. There will also be need to explore more renewable energy sources as well as improved energy efficiency measures in order to meet the growing energy demand without compromising growth and environmental sustainability.
Description
A thesis submitted to the Faculty of Commerce, Administration and Law in fulfilment of the requirements for the Degree of Masters (MCom) in the Department of Economics at the University of Zululand, 2015
Keywords
energy --consumption --South Africa --economic growth