Abstract
Energy use is a pivotal element in the economic life of any country, especially in a developing economy such as South Africa. Based on trends such as load-shedding and oil supply shocks, it is essential to investigate the relationship between electricity and oil consumption to economic growth. This is particularly relevant in the South African context, where policy-makers have had to grapple with excess demand for electricity. The Johansen cointegration and vector error correction model approaches have been used to examine a short- and long-run relationship between energy consumption and economic growth. It has been found that electricity consumption has a negative relationship with economic growth and oil consumption has a positive relationship. Therefore, conservation policies like electricity rationing may be implemented, thereby proving to be beneficial to the broader economy. To offset periodical effects such as oil supply shocks, the country should keep high or adequate amounts of oil reserves and/or invest in oil exploration. It is highly recommended, regarding electricity, that the government is to adopt policy measures and direct interventions to promote an efficient use of electricity.
Highlights
Energy use is a pivotal element in the economic life of any country, especially in a developing economy such as South Africa
Data collected from the International Energy Agency (IEA) include electricity consumption and oil consumption, while gross domestic product (GDP), net gold exports, other subsidies on production in all industries and investment in government stock data were all sourced from SARB
After running the Augmented DickeyFuller test (ADF) and the PP tests for unit root testing, Table 1 presents the results by testing the null hypothesis that LGDP, LEC, LOILC, LNGE, LSPI and LISG are non-stationary
Summary
Energy use is a pivotal element in the economic life of any country, especially in a developing economy such as South Africa. Energy in this study is measured by electricity and oil consumption. Electricity consumption showed fluctuating trends in the period 1971–2012 (Stats SA 2008). Between the periods 1971 and 1990, there was a gradual increase in electricity consumption from 50.77 to 155.99 terawatt per hour (TWH). The fluctuations were as a result of an increase in rural electrification, industrialisation and expansion of the middle class, which resulted in urbanisation and load shedding (Stats SA 2008). A heavily imported commodity in South Africa, has seen an increase in consumption from 15.82 metric tons in 2003 to 24.89 metric tons in 2012
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