Abstract:
This paper investigates the role that the building of two new power stations, Medupi
and Kusile, will play in facilitating future economic activity in South Africa. We use a
dynamic computable general equilibrium (CGE) model to estimate the economy-wide
effects of these new power stations. Our simulation results also provide insight into
how much the local economy has lost due to inadequate electricity supply in the
period leading up to the construction of Medupi and Kusile. We find that the decision
to build additional power generation capacity was necessary and justified, and that
the failure to sooner recognise the need for expansion of the country’s electricity
generation capacity and subsequent delays in commissioning Medupi and Kusile,
likely cost the economy over R110bn in lost production. Additional analysis, in which
a further two-year delay in the construction of Medupi and Kusile is simulated, shows
that such an event will cause the economy to perform below baseline projections up
to 2022.
