Electricity Consumption in Botswana:the Role of Financial Development, Industrialisation and Urbanization

Abstract

AbstractBotswana’s electricity supply is overwhelmed by the growing energy demands with the peak electric power deficits being met through imports. This study seeks to understand the key drivers of this increasing electricity demand. Using the Autoregressive Distributed Lag (ARDL) bounds testing and Error Correction Model (ECM), it examines the role played by financial development, industrialisation and urbanization in Botswana’s energy (or more specifically electricity)-growth nexus between 1981 and 2011. The findings reveal that economic growth, financial development and industrialization positively affect electricity consumption in the short-run and long-run. However, urbanization increases electricity consumption only in the long-term. These finding not only support conservation hypothesis but also imply that policy-makers should take into account the increase in electricity demand arising from financial development, urbanization and industrialisation in energy (electricity) consumption planning in the economy to avoid energy crisis. In addition, policy-makers should search and invests in renewable energy sources such as solar to increase access to cheap energy source.