Electricity transmission, distribution losses and economic growth in South Africa

This paper employed the autoregressive distributed lag (ARDL) methodology to examine the effect of electricity transmission and distribution losses (ETL) on the economic growth of South Africa over the period 1971–2014. After controlling for foreign direct investment (FDI) and financial development, the results of the study show long-run negative relationship between ETL and economic growth. For robustness checks, we account for non-linearities/asymmetries in our model and find that a percentage increase in ETL decreases economic growth from 3.786% to 2.245%. The correction of the distortions of the convergence to long-run equilibrium by temporary shocks is reduced from 30.4% to 25.1%. Additionally, financial development and gross fixed capital formation promote growth while FDI and trade have insignificant effect.