Does Economic Growth Amplify the Energy Effects of Financial Development? Evidence from the SADC Region

Energy consumption is central to economic development, industrialisation and structural transformation in the Southern African Development Community (SADC), yet the extent to which financial development and economic growth jointly shape energy demand remains insufficiently understood. This study examines the dynamic relationship between financial development, economic growth and energy consumption across SADC countries over the period 1980–2023, while accounting for industrialisation, urbanisation, cross-sectional dependence and the interaction between financial development and economic growth. The study employs CIPS unit-root testing, Westerlund cointegration analysis, the Common Correlated Effects Pooled Mean Group (CCEPMG) estimator, Bayesian estimation and the Dumitrescu–Hurlin panel Granger causality test. The results establish a stable long-run relationship among the variables. Financial development, economic growth and industrialisation exert positive and statistically significant effects on energy consumption in the long run, while urbanisation has a negative long-run association. The short-run estimates broadly confirm the positive effects of financial development, economic growth and industrialisation, while the significant error-correction term indicates relatively rapid adjustment towards long-run equilibrium. The Bayesian estimates provide further evidence of a positive financial development–economic growth interaction, with a posterior coefficient of 0.15 and a 95% credible interval of [0.05, 0.25], indicating that the energy-demand effect of financial development becomes stronger as economic growth increases. The Dumitrescu–Hurlin results reveal unidirectional causality from financial development to energy consumption, bidirectional causality between economic growth and energy consumption, and unidirectional causality from urbanisation to energy consumption. These findings indicate that financial deepening and economic expansion cannot be pursued independently of energy policy. The study therefore recommends integrating sustainable finance, energy-efficient industrialisation, planned urban development and renewable-energy investment into SADC’s broader development strategy to support economic transformation while limiting unsustainable growth in energy demand.