The Importance of Effective Economic Regulation for Inclusive Growth: Lessons from South Africa's Renewable Energy Programmes

Abstract

Economic regulation, including competition policy, is not an end in itself but a means to an end, and must ultimately have a positive impact on the economy as a whole. However, this positive impact needs to be broad-based or inclusive, particularly in the context of South Africa given its legacy of non-inclusive growth and persistent inequality. An area where increased participation is important in achieving more inclusive growth in a developing country context is in the procurement of large-scale infrastructure. The South African experience with procuring large-scale renewable energy-based electricity generation capacity carries interesting lessons in this respect.

The paper reviews the development of South Africa's large-scale renewable energy sector from an economic regulation and inclusive growth lens. The regulatory framework governing the sector is examined, looking at both the policy and institutional environment, and their role in contributing to inclusive growth objectives. As such, the paper investigates the role that economic regulation can play in stimulating inclusive growth, through the promotion of both competitive and socio-economic outcomes. The paper also looks at the importance of factoring vested interests in order to maximize inclusive growth outcomes through economic regulation.

Keywords: renewable energy, regulation, inclusive growth, South Africa

JEL Classification: L1, L2, L5, O1, Q4