Urbanisation, energy consumption and economic growth in South Africa

Abstract

The causal relationship between urbanisation, energy consumption, and economic growth was examined for South Africa using annual data from 1990 -2021. The growing need for economies to bounce back after the COVID-19 pandemic and catch up with national economic plans and the Sustainable Development Goals (SDGs) motivated a relook at the important factors that influence economic growth. This study used two measures of energy consumption, namely electricity consumption and total energy consumption. Employing autoregressive distributed lag (ARDL) to cointegration and error correction model (ECM)- based Granger-causality test, the study found unidirectional causal flow from energy consumption to urbanisation in the short run regardless of the energy consumption measure used, and the same causal flow in the long run when total energy consumption was used. The study found a unidirectional causality from urbanisation to economic growth. A bidirectional causality between economic growth and electricity, while no causality was confirmed when total energy consumption was used. The findings from this study confirm the importance of energy consumption and urbanisation in driving economic growth. Policy recommendations are discussed.