Macroeconomic impact of Eskom’s six-year capital investment programme

Abstract

This study analyses the impact of an increase in Eskom’s capital expenditure on the overall macro and sectoral economy using both a Time-Series Macro-Econometric (TSME) model and a Computable General Equilibrium (CGE) model. The simulation results from the TSME model reveal that in the long run, major macro variables (i.e. household consumption, GDP, and employment) will be positively affected by the increased investment. A weak transmission mechanism of the shock on the macro and sectoral economy is detected both in the short run and long run due to the relatively small share of electricity investment in total investment in the economy. On the other hand, the simulation results from the CGE reveal similar but more robust positive impacts on the macro economy. Most of the short-run macroeconomic impacts are reinforced in the long run.