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Energy Crisis, Exchange Rates, and their Influence on South Africa's Gross Domestic Product

Author

Listed:
  • Tshilidzi Munzhelele
  • Ndamulelo Princess Ramavhoya

Abstract

Purpose: This study investigates the long-term and short-term impacts of South Africa's energy crisis and exchange rate fluctuations on its Gross Domestic Product (GDP) from 2013 to 2023. The analysis focuses on key macroeconomic indicators such as employment, productivity, energy prices, and economic growth. Design/Methodology/Approach: Utilising time series econometric techniques, including unit root tests for stationarity, the Johansen cointegration test, the CUSUM and CUSUMSQ stability tests, the Vector Error Correction Model (VECM), and Granger causality analysis, the research identifies significant relationships among the variables. Findings: The findings reveal that GDP, energy prices (as a proxy variable), the real exchange rate, and investment (as a control variable) exhibit a long-run equilibrium relationship. Specifically, changes in any of these variables significantly influence the others over time. In the short run, VECM results indicate that energy prices and investment positively affect GDP, while the real exchange rate has a negative impact. Practical Implications: The study emphasises the need to mitigate the adverse effects of high electricity tariffs on exchange rates through the promotion of foreign direct investment (FDI). Originality/value: The study advocates for dismantling Eskom's monopoly to foster competition within South Africa’s energy sector, thereby enhancing operational efficiency and energy market performance.

Suggested Citation

  • Tshilidzi Munzhelele & Ndamulelo Princess Ramavhoya, 2025. "Energy Crisis, Exchange Rates, and their Influence on South Africa's Gross Domestic Product," International Journal of Economics & Business Administration (IJEBA), International Journal of Economics & Business Administration (IJEBA), vol. 0(4), pages 12-24.
    • Handle: RePEc:ers:ijebaa:v:xiii:y:2025:i:4:p:12-24
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • O55 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Africa
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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