Disruptive load shedding and its dynamic impact on municipal financial performance in KwaZulu-Natal, South Africa

Type of the article: Research Article Abstract Electricity energy consumption plays a significant role in both local and international financial development. However, an imbalance between demand and supply of energy, especially electricity, impedes financial performance on both national and local levels. The purpose of this study is to investigate the dynamic impact of load shedding on financial performance in KwaZulu-Natal. A panel Autoregressive Distributed Lag (ARDL) model, the Toda-Yamamoto Granger causality test, and Error Correction Model (ECM) approaches were applied to a data sample from seven district municipalities for a period from 2016 to 2022. The results reveal an inverse long-term relationship between load shedding and municipal financial performance. Additionally, the Toda-Yamamoto causality analysis indicates a short-run bidirectional causality between load shedding and financial performance. This implies that a high level of electricity cuts leads to poor financial performance. Based on these findings, the study recommends that the government and policymakers implement strategies to improve electricity generation and distribution, and foster a more competitive energy market by allowing the entry of multiple electricity producers beyond Eskom. Furthermore, it advocates for increased investment in alternative energy sources such as solar, wind, and biogas as a means to mitigate load shedding and its adverse effects.