Relationship between electricity prices, consumption and economic growth in South Africa
This study analyses the relationship between electricity prices, consumption and economic growth at national and per sector levels in South Africa over the period from 2006 to 2017 using the auto-regressive distributed lag (ARDL) bounds testing approach and error correction model (ECM). With regards to electricity consumption, in the mining and residential sectors, the relationship between electricity consumption and GDP is insignificant and thus adheres to the neutrality hypothesis. In contrast, in the services, transportation and industrial sectors, there is a positive relationship between GDP and electricity consumption, which adheres to the conservative hypothesis. Lastly, the agricultural sector has a positive relationship between electricity consumption and economic growth in the short run, and thus adheres to the growth hypothesis. In the case of electricity prices and electricity consumption, the results find that the relationship is insignificant on a national basis and this is true for the services, transport, residential and agricultural sectors too, whereas there is a negative association with electricity consumption in the mining sector while the industrial sector has a negative association with electricity prices. The results for the relationship between electricity prices and electricity consumption show that in the national, services sector, transport sector, residential and agricultural sectors, electricity consumption has an insignificant relationship with the electricity prices. This is in contrast to the mining sector, whose electricity consumption is negatively associated with electricity prices while the industrial sector electricity consumption has a positive and significant relationship with electricity prices. With regards to the relationship between electricity prices and GDP, the results find that there is an elastic association in the national, services, mining, and industrial sectors with a negative impact on the GDP in the long run. In contrast, the relationship between electricity prices and GDP in the transport and residential sectors is insignificant.
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