MODELLING THE EFFECT OF DISRUPTION TO ELECTRICITY SUPPLY ON ECONOMIC GROWTH IN BENIN by Arnaud G. Dakpogan Dissertation presented for the degree of Doctor of Philosophy (PhD) in Development Finance in the Faculty of Economics and Management Sciences at the University of Stellenbosch Supervisor: Professor Eon Smit, University of Stellenbosch Business School Stellenbosch University https://scholar.sun.ac.za ii Declaration I, Arnaud G. Dakpogan, declare that the entire body of work contained in this dissertation is my own, original work; that I am the sole author thereof (save to the extent explicitly otherwise stated), that reproduction and publication thereof by Stellenbosch University will not infringe any third party rights and that I have not previously in its entirety or in part submitted it for obtaining any qualification. AGD Dakpogan December 2019 Copyright © 2019 Stellenbosch University All rights reserved Stellenbosch University https://scholar.sun.ac.za iii Dedication In memory of my beloved son, Joseph Essenam Arnaud Dakpogan. My dearest son, this PhD journey has taken so much of our time together. I was not able to see your face, carry you in my arms as your father, and welcome you in this world. I long to hug you one day in Heaven. I love you, my dearest son. From your earthly father. In memory of my beloved aunt, Marguerite Tchanhoun. Maman, I will always be grateful to God for using you that night to save the lives of both my mother and I from a tragedy. Your generosity and compassion will never be forgotten. I love you my dearest aunt and long to hug you one day in Heaven. From the son that you have adopted as your own. Stellenbosch University https://scholar.sun.ac.za iv Acknowledgements First, I would like to thank God for his love, mercy, goodness and faithfulness towards my family and me during this PhD journey. Without God I would have not been able to complete such a journey. His grace has made a way for me. Second, I am sincerely and deeply grateful to my supervisor, Professor Eon Smit, for his commitment to the supervision of my dissertation. From the time of finalization of the dissertation topic to the period of its submission, he has been very diligent in providing me with guidance and comments, which have served as a compass for this dissertation and helped to improve its quality. In addition to his academic support, Professor Smit pre-funded my attendance to the 2016 IAEE conference at the Norwegian School of Economics, where I was able to present the results of my research and receive relevant feedback. Moreover, Professor Smit has also pre-financed the editing of this dissertation. May God bless you, Dear Professor, for all your commitment and support in the completion of this dissertation. Third, I would like to thank Sheila Hicks and Carol Leff, two language editors who have been very helpful. Knowing that I have done my best to write this dissertation in academic English although my first language is French, they have spent a lot of time proofreading it. Fourth, I would like to express my gratitude to my parents, family, siblings and in-laws for all their support. I am grateful to my mother, Catherine Hounwanou, for all her financial support, prayers and encouragement. She has been a great example for me. Mother, giving up your own PhD in biology because of my sister and I was not a vain sacrifice. I am happy to give back to you my PhD. May God continue to bless and keep you safe, my beloved mother. I am also grateful to my father, Nestor Dakpogan, for his support and encouragement. Father, your prayers and encouragement have always been very helpful to me. I would like to sincerely thank my wife, Heather Mcniel, for all her prayers and support during this PhD journey. Heather has been very supportive and encouraging since the day I decided to enrol for a PhD. Great thanks, Heather, for your support. I am also very grateful to my beloved daughters, Hannah-Ruth Mahougnon Dakpogan and Eliana-Catherine Oluwatobi Dakpogan. Hannah-Ruth has always brought me a lot of joy with her funny games and stories whenever I am stressed with work, and Eliana-Catherine who was born at the late stage of my PhD journey is a great delight, and an answer to prayers. Thank you so much, precious daughters, and let this PhD be an inspiration for you. I would like to thank my siblings and their spouses: my sister Aurelia and her husband Jean-Luc, and my brother Herve and his wife Myriam. Many thanks for your financial support and prayers. Dear Aurelia, I am sure you will find in this dissertation a great encouragement to complete your PhD in Agricultural Economics. Dear Herve, thanks for showing a good example by getting a PhD in biology. My gratitude is also extended to my mother-in-law, Beverly Mcniel, and sisters-in-law, Catherine Stellenbosch University https://scholar.sun.ac.za v Mcniel, and Melissa Whitmoyer for their support and prayers. I am particularly grateful to my father- in-law, Stanley Mcniel, for his great support, encouragement and prayers. Fifth, I would like to thank Mr. Femi for encouraging me to apply for the PhD in Development Finance. My gratitude extends to Professor Charles Adjasi and Dr. Marwa Nyankomo for their encouragement and the very useful advice they provided me with since the beginning of this PhD journey. My appreciation also goes to Professor Michael Graham, Professor Anabel Vanroose, Dr. Fanta Ashenafi, Dr.Sola Oduwole, Dr. Antanasius Tita, Dr. Mcpowel Fombang, and Dr. Akinsola Foluso for their encouragement and advice. I am very grateful to the rest of the faculty of the Development Finance program: Professor Sylvanus Ikhide, Professor Meshach Aziakpono, and Dr. Peter Opperman. To all my PhD colleagues, and particularly the 2014, 2015, and 2018 cohort (Paul Gbahabo, Emmanuel Oduro Afriye, Nthabiseng Moleko, Sabastine Agonwale, Samuel Ajuwon, Master Mushonga, Berta Silva, Monde Nyambe, Michael Maphosa, Suzane Mpande, and Fola Adejumo), I say well done to those who have finished the journey and a good job for those who are still working on their dissertations. Sixth, my gratitude goes to the USB for granting me a doctoral scholarship for two years (2016 and 2017) which has allowed me to be a full time PhD student. I am grateful to the Post Graduate International Office (PGIO) of Stellenbosch University, the OPEC Fund for International Development, and the USB for funding my attendance at various conferences where I had the opportunity to present chapters of my dissertation. With such support, chapters of my dissertation were discussed at these conferences on energy economics (at the Norwegian School of Economics in Norway, at Montpellier Business School in France, and at Oxford University in the UK) and I was able to receive relevant comments, which helped to improve the quality of the dissertation. My appreciation also goes to the doctoral committee of the USB and to all the lecturers and PhD candidates who have provided me with relevant feedback during the different doctoral colloquiums organized by the USB. Finally, I am sincerely grateful to the USB for giving me the opportunity to study Development Finance at the PhD level. Stellenbosch University https://scholar.sun.ac.za vi Abstract Infrastructure is an important factor that contributes to economic growth. Energy, telecommunications, roads, rails, sea ports, airports, and drinkable water are important elements which determine the ease of doing business in a country. Among these various types of infrastructure, energy is essential, as it contributes to the development of other infrastructure. Energy is important for the construction of roads, telecommunication lines, sea ports, airports, and even the transportation of potable water. Among the different types of energy, electricity is essential as it plays a vital role in the functioning of all sectors of the economy. Electricity is used in industry, the health sector, at schools, in the transport sector, in the agroindustry, in the construction sector, in banks, in public administration, and in houses, amongst other things. Because of this, electricity is an important factor that contributes to economic growth and the improvement in the standard of living. However, the situation of sub-Saharan Africa regarding access to and consumption of electricity is very alarming. Sub-Saharan Africa has the lowest access to and consumption of electricity in the world. Benin is one of the countries with low access to and consumption of electricity in sub- Saharan Africa. In addition, the Beninese electricity sector faces three major challenges: a high level of dependency on the importation of electricity, high losses of electricity, and high reliance on oil for domestic electricity production. Benin is the only sub-Saharan African country which figures simultaneously among the top 10 countries for heavy dependence on importation of electricity in 2015, for the high proportion of electricity losses in 2015, and for the heavy reliance on oil for the domestic electricity generation in 2014 (most recent year for which data was available at the time of analysis). Other countries in sub-Saharan Africa figure in either one or two of these lists of top 10 countries. This indicates that in sub-Saharan Africa, the Beninese electricity sector is one of the most vulnerable. This was among the main reasons that the focus of this study is on the Beninese electricity sector. First, the country imports more than 70% of its electricity supply from neighbouring countries such as Ghana and Nigeria. Hence, it is very vulnerable to any electricity shortages occurring in these neighbouring countries.