A symmetric impact of energy consumption on economic growth in South Africa: New evidence from disaggregated data

Abstract

This paper aims to re-examine the impact of energy consumption on economic growth in South Africa over the period from 1981 to 2020. The study used a non-linear ARDL model and four proxies of energy consumption, which are largely from non-renewable sources, to examine this linkage. The proxies used in the study include electricity consumption, coal consumption, gas consumption and oil consumption. The study found that, in the short run, economic growth in South Africa is only affected by negative and positive shocks in electricity and oil consumption. However, in the long run, growth is affected by positive and negative shocks in oil consumption, positive shocks in electricity consumption, and negative shocks in both coal and gas consumption. Overall, the study found that in the short run, positive shocks in electricity and oil consumption affect economic growth positively, while negative shocks affect growth negatively. In the long run, the study found that 1) positive (negative) shocks in oil consumption affect economic growth positively (negatively); 2) positive shocks in electricity consumption affect economic growth positively; and 3) negative shocks in coal and gas consumption affect economic growth negatively. This implies that, even though South Africa may be one of the largest energy consumers in Africa, its economic growth in the short run is not entirely vulnerable to non-renewable energy demand shocks. This also implies that South Africa can still pursue energy conservation policies and renewable energy explorations in the short run without wholly compromising its comprehensive economic growth strategy. Policy implications are discussed.