Energy Consumption and Economic Growth Modelling in SADC Countries: An Application of the VAR Granger Causality

The study investigated the relationship between energy consumption and economic growth in 10 SADC countries using the VAR model over the period 1971 to 2015. The variables used were first converted to growth rates before they were used in the model estimated. The results indicate unidirectional causality running from real economic growth to energy consumption in Angola, Democratic Republic of Congo, Mauritius, Namibia, bidirectional causality between energy consumption and economic growth in Botswana and Mauritius and no causality in Mozambique, South Africa, Zambia and Zimbabwe. In countries where real economic growth Granger causes energy consumption the conservation hypothesis is confirmed. In countries where no causality was found the neutrality hypothesis is confirmed which implies that energy conservation will not lead to decreased economic growth and energy consumption will not be stimulated by economic growth. The feedback hypothesis confirmed in Botswana and Mauritius implies that an increase in the economic output will increase the level of energy consumption while an energy conservation policy will adversely affect economic output.