Determinants of Electricity Transmission and Distribution Losses in South Africa

Abstract

The increased electricity demand amidst inadequate electricity generation in South Africa has plunged the country into frequent power outages and load shedding. However, the country still has the lowest electricity transmission and distribution losses in sub-Saharan Africa. Despite low losses, there is still an opportunity to reduce losses further and reduce power outages and load shedding. This study examines the determinants of electricity transmission and distribution losses in South Africa. The results will inform policymakers on avoiding higher electricity transmission losses to alleviate the current electricity shortfall. Using the time-series data from 1971–2020 and the autoregressive distributed-lag (ARDL) bounds testing approach to cointegration, the study confirmed a long-run relationship between electricity transmission, distribution losses, and income, price, investment, political regime, and economic integration. Regression analysis from the ARDL methods revealed that investments, political administration, and economic integration positively influence electricity transmission and distribution losses. At the same time, income reduces electricity transmission and distribution losses in the long run. However, income, price, and economic integration minimize electricity transmission losses in the short run while the remaining variables maintained their positive effects. The implication is that without proper checks in place, an expansion in South Africa’s economic integration, investment, and democracy may negatively affect the electricity sector of the country through an increase in electric power losses, while higher income will help the industry via lower electric power losses. The paper, among other things, recommends building a robust economy to ensure lower levels of electricity transmission and distribution losses.