An Investigation into the Electricity Supply and Economic Growth Nexus for South Africa

Abstract

A booming industrial sector helps to complement and sustain continued economic growth. On the other hand an efficient and steady supply of electricity is of paramount importance for the growth of an industrial sector of a country as it acts as catalyst for economic growth. The study sought to examine the causal relationship between electricity supply and economic growth in South Africa for the period 1990-2012. The study incorporated electricity power outages and employment to form a multivariate framework using a vector error correction model (VECM). The study established a unidirectional causality flowing from electricity supply to economic growth. The result implies that electricity supply boosts economic growth in South Africa. There is need for the policy makers to ensure they put in place measures that can improve the electricity supply in the country through a reduction in power outages for the industrial sector.Keywords: Electricity supply, Economic growth, Causality test, NexusJEL Classifications: C22; O13; Q14