The causal relationship between energy and economic growth through research and development (R&D) : the case of BRICS and lessons for South Africa

Abstract

The energy industry has a significant influence over the sustainability of the economies from job creation to resource efficiency and the environment. This study’s purpose is to examine the causal dynamics between energy (renewable and non-renewable) on GDP taking into account the role R&D expenditure, representing technological progress, plays in each and how South Africa differs from other emerging economies, such as BRICS. To do so, we used the panel data method proposed by Emirmahmutoglu and Kose (2011) [1] for the period 1996 to 2015. The findings confirmed a bidirectional causality from RE to Non-RE for India and SA and the opposite for Brazil; a one way causality from Non-RE to GDP in Brazil and SA; from Non-RE to R&D for Brazil, Russia and China; and from GDP to R&D in Russia, India and SA. The results for SA are a reflection of the country’s energy supply crisis. The fact that RE does not have an impact on GDP and R&D does not mean that the RE is not a promising option for the future. On the contrary, it might mean that the share of RE and the total R&D were both at low levels historically to make any significant impact.