The role of electricity consumption, price, and coal exports on South Africa’s Economic Growth

Abstract

Coal is a key energy source and is widely traded among countries. South Africa as a developing country is one of the countries rich and heavily reliant on coal as an input for electricity generation. Electricity consumption is a crucial contributor to GDP, and conversely, GDP plays a pivotal role in driving electricity consumption. However, the country faces a critical issue with electricity rationing and escalating electricity prices, sparking growing concerns as tons of coal are being exported. The study utilized quarterly data spanning from 2016 to 2023 to investigate the impact of electricity consumption, electricity price, and coal exports on South Africa’s economic growth. Through the Autoregressive Distributed Lag (ARDL), the study investigated the short and long-run relationship. Electricity consumption and price had a positive relationship with GDP at a 1% significance level in the long run whilst coal exports had a negative relationship with GDP at a 5% significance. Electricity consumption aids productivity enabling seamless operations in various sectors. High electricity prices can drive businesses and households to invest in energy-efficient technologies and practices. This can lead to innovations and advancement in energy-saving solutions, fostering new industries and job creation. The export of coal in South Africa contradicts the export-led growth hypothesis as it has not resulted in significant economic benefits which is questionable due to the dire state of the country of having loadshedding. And as seen, loadshedding has been detrimental to the economy. Thus, the findings of this research provide valuable insights for policymakers and stakeholders, guiding strategic decisions to foster sustainable economic growth and enhance the resilience of South Africa’s energy sector.