Energy Demand and Households Welfare in South Africa

Purpose: Energy is the mainstay of the South African economy and is an important sector that creates jobs and value by extracting, transforming, and distributing energy goods and services throughout the economy. The breakdown of energy demanded that was consumed by the various sectors of the economy shows 51 percent for the Industry Sector, 26 percent for the Transport Sector, 11 percent for the Commerce and Public Sector, 7 percent for the Residential (Households) Sector, 2 percent for Agricultural Sector and 3 percent as non-Specified. South Africa is facing the challenge of increasing household energy demand. The rising demand seems to be higher than the current energy (electricity) sharing capacity in the country, leading to electricity rationing and rising episodes of load shedding in the country. The rising rationing and load shedding have implications on the economy at large, especially on the household welfare status of South Africans in the form of irregular or unavailability of well-cooked home meals, lack of a heating system and total collapse of means of communication and livelihood of the people. Design/Methodology/Approach: Econometric techniques of fully modified least squares was used to study the nexus between energy demand and the welfare status of households in South Africa. The study is based on the energy demand theory, which states that energy demand is inelastic in nature and has implications for household welfare and sustainability. Findings: The study showed that rising energy demand and its associated costs adversely impact households’ welfare conditions in South Africa. Research Limitation: This study used a long-run estimate, which has implications for the future economic relationship between energy demand and household welfare. Therefore, future studies in this area may want to consider short-run estimates, so they will need information on the prevailing short-run economic relationship between the two economic phenomena in South Africa. Practical Implication: The study's findings reinforce the argument that the rising cost of energy consumption in South Africa has an adverse effect on the disposable income of most middle—and low-income households, thereby limiting their access to electricity for cooking home meals, heating systems, and charging communication appliances, which further strengthens the rising problem of energy poverty in the country. Social Implication: The rising energy crises in South Africa lowers household welfare due to the crowding-out effect of expenditure on energy on the households’ per capita income, thereby leading to poverty and a miserable lifestyle. Originality/Value: The study expands the frontiers of knowledge on the nexus between energy demand and the welfare of households in South Africa. Specifically, the study revealed the increasing impact of energy demand on the welfare status of households in South Africa.