Financial Development and Energy Use (Consumption), Urbanization and Industrialization Role in South Africa

This paper looks at the relationship between energy consumption, financial development, economic growth, the role of industrialization and urbanization in South Africa from the year 1970 to 2014. The study employs the Johansen co-integration test and Vector Error Correction model (VECM) also, Granger causality test is used for the study. The result confirms that there is a long-run relationship between the variables (energy consumption, financial development, economic growth, industrialization and urbanization) in South Africa. More so, urbanization, financial development and industrialization are positively correlated to energy consumption in the long-run. The result obtained shows the long-run bidirectional causality between industrialization and energy utilization, financial development and energy consumption and also financial development and industrialization. Therefore the study recommends a well-developed financial system, an effective policy towards increasing the effectiveness of economic activities of the country. Likewise, promoting urbanization and industrialization helps in development processes. Hence increases energy consumption. Keywords: Energy Consumption, Financial development, Economic growth, South Africa, Time series, Co-integration, Vector error correction model (VECM).