Energy Minister Jeff Radebe announced on Thursday that the 27 electricity generation projects, part of the government’s independent power purchase programme, would be signed on Tuesday. This would release an investment of R56-billion into the economy over the next two to three years and give the green light for these private renewable energy power stations to be built.

We used ADRS’ Multi-sector Macroeconometric Model of South Africa (MEMSA) to ask: What If the electricity sector receives an additional R56-billion investment over the next three years, 2018-2020?

What will be the growth and employment impact of the new investment on the energy sector and on the economy over the period 2018-2025?

Given the energy sector’s extensive linkages to other sectors of the economy, the impact of the new and substantive investment is expected to be felt throughout the economy. MEMSA’s simulation results include the direct, indirect and dynamic impact of the new injection. Here are few of the model’s simulation results:

• The output of the energy sector is projected to annually grow by an additional 0.4%, on average. Over the next 8 years (2018-2025), the increase in the output of the energy sector will be R40.4 billion (nominal) or R14.3 billion (real, 2010 prices).

• Over the period, average annual employment in the energy sector will be higher by 2200. By 2026, the employment in the sector will be 4800 higher.

• The real GDP is projected to annually grow by an additional 0.1%, on average. This means, over the period, the economy will generate an additional R297 billion (nominal) or R144 billion (real) output.

• On average, the national unemployment rate will be annually lower by 0.12%. Over the next 8 years (2018-2025), the economy will add 106000 jobs to the economy. The addition to employment includes 6500, 7500, and 92000 jobs to the primary, manufacturing and service sectors, respectively.

The model results include the impact of the new investment on a wide range of sector and aggregate indicators, which are available upon request.

We hope that you find this Did You Know/What If a useful and thought-provoking publication. We warmly invite your comments, questions or suggestions for a scenario or policy question that you would like to see addressed in future issues. Please let us know if you have any comments or questions!