Illuminating Economic Activity: Evidence from Night Lights Data in South Africa

This paper explores the use of night lights to track economic activity in South Africa at a level of spatial granularity and periodic frequency not obtainable by traditional indicators. It shows mismatches between urban population density, economic activity and infrastructure. We show that satellite data suggest very low growth in night light intensity across South Africa over the last decade and a decoupling from economic and population growth. We show that satellite data sheds light on the implications of the collapse of state service delivery and South Africa's decline in GDP per capita over the last decade. The most likely explanation of the slow growth in night light intensity in South Africa is municipal infrastructural degradation, observed in the breakdown of a large proportion of streetlights. Other possibilities include a shift to solar and off‐grid electricity supply, the decline in industrial and manufacturing production in South Africa, or improvements in energy efficiency. However, the shift to more efficient lighting technologies does not explain why night lights has grown so much more in fast growing developing countries. These results reveal a lack of densification in urban areas that contribute to higher transportation costs and reservation wages, discriminating against job creation and efficient service provision. Our results raise questions about the depth of South Africa's structural slowdown, the ability of traditional indicators to fully capture shifts in spatial economic vibrancy, and the impacts of urban planning policies on economic efficiency and development.