The impact of renewable energy consumption, foreign direct investment, economic growth, and carbon dioxide emissions on soybean production in South Africa

Text in English

Soybean is one of the most significant global crops due to its high protein content and high-quality essential oils, therefore, it is used for food, energy, and animal feed, however, climate change threatens its productivity. Climate change influences all sectors of the economy but the most vulnerable is agriculture, the main source of income and ensures food security for the majority of rural communities. Although the production of soybeans has been increasing over the years, South Africa remains a net importer. The climatic changes brought on by greenhouse gas pollution, such as carbon dioxide (CO2) emissions have adversely affected soybean production. To reduce these emissions, the country needs to invest in the use and production of renewable energies. Renewable energy use not only reduces emissions but also creates opportunities. Currently, the South African energy sector depends largely on the burning of fossil fuels responsible for more CO2 emissions. The agricultural sector has a chance to contribute by providing biomass feedstock for renewable energy production as farmers are the producers of these feedstocks. Developed countries have successfully increased their renewable energy mix using bioenergy but this requires investment. Energy transition is expensive for many developing countries, including South Africa, as domestic savings are not enough and to increase capital inflows to uplift economic growth, they need to attract Foreign direct investment. Africa needs climate finance from developed countries which are, also, the main contributors to climate change. In this study, the main objective was to analyse the effect of renewable energy consumption, foreign direct investment (FDI), economic growth, and carbon dioxide emissions on soybean production in South Africa between the years 1975 to 2021. This study was informed by macroeconomic theories, which are the Environmental Kuznets Curve, Pollution Haven, and Pollution Halo Effect Hypothesis. The data on key variables was collected from World Development Indicators, Food and Agriculture Organization, and British Petroleum. The Autoregressive Distributed Lag (ARDL) Model was utilized to evaluate the relationship that exists among the variables. The cointegration bounds test was conducted and found that a long-run relationship exists among the variables. The ARDL model results showed that in the short run, CO2 emissions and FDI had a negative and favourable effect on soybean production, respectively. While, in the long run, soybean production was positively impacted by renewable energy consumption, foreign direct investment, and economic growth. These results were further validated by DOLS, FMOLS, and CCR models. The pairwise Granger causality was then carried out and the results demonstrate that there was unidirectional causality from soybean production and renewable energy consumption to FDI, from CO2 emissions to soybean production, and FDI, and between GDP and FDI the relationship was bidirectional. The study recommended that investments should be channelled towards renewable energy use in the agricultural sector and climate-smart farming in the production of soybeans. Practically the agricultural sector should be supported and the emphasis should be on soybean production developments, and more investments should be made at the rural level. Therefore, this suggests that the government must be intentional about investment in soybean production at the rural level. This can be achieved by prioritizing land allocation for the production. The investments should not only be in production for energy but also in processing soybeans for energy to broaden the participation of farmers in the energy sector. This will open doors for rural farmers as the global demand for soybeans is also increasing for energy production and stimulate production at the local level ultimately improving farmers' livelihoods and increasing renewable energy mix and adoption in the country.

Agriculture and  Animal Health

M. Sc. (Agricultural Economics)