Population growth and economic growth in South Africa: Evidence from Engle-Granger cointegration analysis

The purpose of this study is to examine the long-run and short-run effects of population growth and demographic change on economic growth in South Africa. The study uses annual data for 1960 to 2022. It estimates the short-run and long-run effects of population growth on economic activity in South Africa using the Engle-Granger cointegration methodology. The Engle-Granger results provide evidence of a long-run relationship between real GDP, population and capital accumulation. In the long run, capital formation significantly raises GDP across all specifications, with elasticities ranging from 0.20 to 0.40. Whereas a rising population significantly raises GDP in the long run in most models, with elasticities between 0.65 and 0.84, indicating the importance of scale and labour-supply effects. However, in specifications that include education, the population coefficient becomes insignificant, reinforcing the conclusion that population contributes to growth when complemented by human-capital accumulation. Lastly, evidence from error correction model suggests that deviations from long-run equilibrium are corrected relatively quickly; however, in the short run, population growth is an insignificant short-run driver of economic growth. In policy terms, this implies South Africa should link demographic planning to investment promotion, education quality, skills formation and labour-absorbing growth rather than relying on population growth alone.