Electricity demand in South Africa: is it asymmetric?

• Date: 01 September 2017
• Author: Roula Inglesi‐Lotz,Rangan Gupta,John W. Muteba Mwamba
• DOI: http://doi.org/10.1111/opec.12103
• Published date: 01 September 2017

Electricity demand in South Africa: is it

asymmetric?

Rangan Gupta*, Roula Inglesi-Lotz* and John W. Muteba Mwamba**

*Professor, Associate Professor, Department of Economics, University of Pretoria, Pretoria0002, South

Africa. Email: roula.inglesi-lotz@up.ac.za

**Professor, Department of Economics and Econometrics, Faculty of Economic and Financial Sciences,

University of Johannesburg, Auckland Park2006, South Africa.

Abstract

The electricity demand in South Africa has experienced vast changes both from a policy point of

view and due to the country’s great industrialisation and urbanisation. The literature dealing with

the South African electricity case, to date, has not taken into account these changes and their effect

to the symmetric behaviour of the residential and industrial electricity consumers. Hence, this

paper aims at examining the asymmetric behaviour of the annual South African electricity demand

(total, residential and non-residential) for the period 1960–2012. To do so, three different tests

were used: the entropy test proposed by Racine and Maasoumi (2007. Journal of Econometrics

138, 2, 547; 2008. Econometric Reviews 28, 246), the conditional symmetry test proposed by Bai

and Ng (2001. Journal of Econometrics 103, 225) and the Triples test proposed by Randles et al.

(1980. Journal of the American Statistical Association 75, 168). The findings showed that there is

weak evidence of asymmetry, given that the null hypothesis of symmetry can only be rejected at 10

per cent level of significance. Hence, econometric models examining the South African electricity

demand during the same period are credible in their assumption of a linear data generating process.

1. Introduction

In the energy literature, models that examine the dynamics and factors of energy and

electricity demand, are mostly developed assuming that the consumers’behaviour

exhibit symmetric responses to various shocks, e.g. in prices and income. However, in

the macroeconomic literature, the asymmetric behaviour of variables has been discussed

widely with specific mention on the asymmetry of prices. Tobin (1972), e.g. established

that prices exhibit a certain sticky behaviour when going down but being more flexible

when going up. This behaviour has specific effects to the national aggregate demand

behaviour (Ball and Mankiw, 1994). Similarly, energy consumers might react

differently, for instance, not only to price cuts and price increases but also to changes

above the previous maximum and below the maximum (Gately and Huntington, 2002).

JEL classification: C22, Q40.

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