Long-run relationship between commodity prices and economic growth in South Africa

Abstract

The study explored the relationship between economic growth and commodity prices in South Africa in the long term using Autoregressive Distributed Lag (ARDL) Bounds Testing. The empirical results show evidence of a stable long-run relationship between commodity prices and economic growth, which supports the resource‑led growth hypothesis and export-led growth theories. Specifically, the study found that gold and PGM prices have both positive and significant long-term effects on real GDP; this indicates that South Africa relies heavily on mineral exports to increase total revenue. Additionally, coal prices have a significant but smaller long-run effect, though environmental and transition risks remain important considerations. The findings of the study emphasize the need for macroeconomic stability, which means the South African government should promote value-enhancing and subsequent industrial development in the mining sector; diversify export markets; increase the amount of investment in infrastructure and human capital; and gradually move away from traditional energy sources in favour of cleaner forms of power supply. These measures will provide a foundation for long-term sustainable economic development; however, they are also important preconditions for increasing the resilience of current and future production systems to environmental changes. The study is of significance as it adds empirical evidence on the long-run association between commodity prices and economic growth in South Africa using the ARDL technique. It highlights the differing impacts of gold, PGMs, and coal prices on GDP growth while offering policy insights on industrialization, export diversification, and sustainable economic development.