Coal consumption and economic growth in South Africa: An empirical investigation

Abstract

In this paper, we examine the causal relationship between coal consumption and economic growth in South Africa, which is one of the largest coal producers and consumers in the world. We incorporate employment as an intermittent variable between coal consumption and economic growth – thereby creating a simple trivariate causality model. Using the ARDL bounds testing approach, we find that there is a unidirectional causal flow from economic growth to coal consumption in South Africa – both in the short run and in the long run. The results also show that there is a short-run unidirectional causal flow from coal consumption to employment, as well as a bidirectional causality between economic growth and employment. The study, therefore, concludes that for South Africa, it is economic growth, which Granger-causes coal consumption, and not vice versa. This implies that coal conservation could be achieved in South Africa – without necessarily compromising economic growth.