The effect of mismatched supply and demand of electricity on economic growth in South Africa

ABSTRACT

Since 2008, the South African economy has experienced several power cuts (unplanned or as part of a load-shedding schedule), presumably because of the inability of the electricity supply to cover the demand. This paper examines the impact of such a demand-supply mismatch on the country’s economic growth within a production function framework. To do so, we use an Autoregressive Distributed Lag Model (ARDL) for the period 1985 to 2019. The paper finds that a positive mismatch (or surplus) of electricity (supply>demand) boosts economic growth in the long run. This finding provides evidence that supports the necessity of electricity supply expansion and the promotion of energy efficiency measures that both will create a mismatch (surplus) conducive to economic growth.

KEYWORDS:

• Electricity
• energy
• South Africa
• mismatch

Disclosure statement

No potential conflict of interest was reported by the author(s).

List of Acronyms

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Notes

¹ Electricity is one of the components of energy. Although the energy market is far broader than the electricity market, it is useful to use general trends in the energy market to better understand the electricity market. Thus, throughout the paper, energy market outcomes are used to describe and understand the electricity market.

² The numbers denote the appropriate number of lags chosen for each variable of the regression.