Analysing Impacts Responsible for South Africa's Energy Consumption: LMDI Application

Industry participation is pivotal to the economic growth of any nation. However, its energy demand, if not managed can cripple the economy. South Africa recently experienced load shedding resulting in the decreased of manufacturing and mining outputs among others dragging down the economic growth. This study focused on understanding those factors responsible for the energy consumption in the following industrial sub-sectors: basic chemicals, non-metallic minerals, basic iron and steel, basic non-ferrous metals and other manufacturing industries, between 1994 and 20016 through the application of Logarithmic Mean Divisia Index (LMDI), a form of Index Decomposition Analysis (IDA). These factors are the activity, structure and intensity. Among the three factors, activity was the most responsible for the increase in the amount of energy consumed whereas intensity factor contributed to minimizing energy consumption. Structural effect contributed minimally to the consumption of energy. The results implied concentrating more on policies that would affect the activity effect.