Load-shedding makes South Africa poorer

There is a clear relationship between electricity consumption and wealth, which explains why Eskom load-shedding is so devastating to South Africa.

The relationship is illustrated by plotting electricity or energy consumption against gross domestic product (GDP) per capita.

It reveals that countries that consume less electricity have a far lower GDP per capita, while countries that consume greater energy are richer.

Five countries have energy consumption of lower than 100 kilowatt-hour (kWh) per person — Haiti, South Sudan, Niger, Ethiopia, and Benin.

These countries are some of the poorest in the world and struggle with problems like absolute poverty.

On the other end of the scale, numerous countries, which are typically very rich, consume over 10,000 kWh per capita.

These countries include the United States, Sweden, Luxembourg, Finland, Canada, Qatar, Bahrain, Norway, and Iceland.

Most of these countries are known for having stable and strong economies and their citizens enjoy high living standards.

The relationship between electricity and wealth is logical, as increased energy availability increases the number of production possibilities.

Industrial revolutions are characterised by technological developments significantly increasing production output.

The First Industrial Revolution, for example, was closely linked to steam power increasing productivity in manufacturing and accelerated transportation.

The Second Industrial Revolution integrated scientific knowledge into technological developments, leading to electrification used to power equipment, machinery, and tools.

The Third Industrial Revolution, which was largely based on the discovery of the semiconductor chip, also relies on a stable electricity supply.

Having enough or even excess electricity ensures that there are fewer restrictions on the extent to which an economy can innovate and grow.

In South Africa, the lack of a stable electricity supply is preventing businesses from growing and is putting a cap on economic growth.

The result is a decline in GDP per capita, which means South Africans are getting poorer while the rest of the world is getting richer.

Electricity consumption and wealth

The chart and table below show the relationship between energy consumption and wealth:

This article was first published by Daily Investor and is republished with permission.

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