Electricity Consumption in Lesotho: The Role of Financial Development, Industrialisation and Urbanisation

Abstract

Electricity Consumption in Lesotho: The Role of Financial Development, Industrialisation and Urbanisation Lira P. Sekantsi, Retselisitsoe I. Thamae, Letsie E. Mohatonyane Abstract Similar to other developing economies, Lesotho’s security of electricity supply is threatened by the growing energy demands with the peak power deficits being met through imports. This study seeks to understand the key determinants behind this growth of electricity consumption. It examines the role played by financial development, industrialisation, and urbanisation in Lesotho’s energy-growth nexus between 1973 and 2012. The findings from the co integration analysis reveal that economic growth, financial development, and industrialisation are positively related to electricity consumption in the long-run. Urbanisation, however, is found to have no significant effect on electricity consumption. Furthermore, the introduction of regulation has impacted positively on electricity demand in Lesotho. This partly explains the observed increase in household electrification level in recent years, which has been rising in tandem with electricity demand. In addition, the study finds bidirectional causality between financial development and electricity consumption, and between urbanisation and economic growth. It also finds unidirectional causality from electricity consumption to industrialisation, from industrialisation to urbanisation, and from urbanisation to financial development. Full Text: PDF DOI: 10.15640/jibe.v4n1a2