Natural Resources, Urbanisation, Economic Growth and the Ecological Footprint in South Africa: The Moderating Role of Human Capital

The dependence on non-renewable energy sources has been a major driver of economic growth in South Africa. Economic growth benefits the society via the provision of infrastructures, improvement in living standards and employment creation. However, it has its downsides, especially when an economy pays less attention to its natural environment while intensifying its desire for affluence (Uddin et al. 2019; Yasmeen et al. 2020). In Africa, South Africa is arguably the most developed. This development comes with employment generation, improved welfare, export expansion and a foreign direct investment (FDI) inflow. Now, keeping pace with this development comes at a cost to the environment. It has inflicted a trade-off between higher economic growth and lower environmental quality. Therefore, despite flourishing in terms of economic performances, the environmental attributes in South Africa have persistently deteriorated over time as the country now harbours an ecological deficit territory (Global Footprint Network (GFN), 2019). An ecological deficit territory is the one where the ecological footprint (EF) is higher than the biocapacity (Siriwat, Tiedt 2019; World Wildlife Fund, 2018). In South Africa, for instance, the biocapacity and EF were respectively 1.46 gha and 3.35 gha in 1990. The biocapacity dwindled to 1.26 gha, whereas the EF stood at 3.05 gha in 2000. In 2010, the EF soared to 3.60 gha, leading to a decline in the country's biocapacity to 1.08 gha. In 2017, the country's biocapacity declined to 1.03 gha, whereas its EF was 3.16 gha (GFN, 2019).

The EF is measured in global hectares (gha) of land. It measures the effects of anthropogenic activities on grazing land, crops land, ocean, forest products, carbon footprint and built-up land. Previous studies have used the EF to capture the influence of anthropogenic activities on the natural environment (Zameer et al. 2020; Destek, Sinha 2020; Zhang et al. 2020; Nathaniel 2020; Marti, Puertas 2020; Ulucak et al. 2020; Omoke et al. 2020; Baz et al. 2020; Yilanci, Pata 2020; Dogan et al. 2020; Altıntaş, Kassouri 2020; Zhang et al. 2020; Usman et al. 2020; Sharif et al. 2020). The link between natural resources (NR) extraction and the EF has been explored adequately well in the literature. According to Danish et al. (2019), economic growth is always accompanied by urbanisation and industrialisation. The latter encourages NR extraction, which could promote environmental degradation by reducing biocapacity. Activities such as mining, bush burning and deforestation have adverse effects on biodiversity as well as other components that support human existence (Balsalobre-Lorente et al. 2018). There is still no consensus on the impact of NR extraction on the EF. For instance, Zafar et al. (2019) and Ulucak et al. (2020) have discovered that NR extraction contributes to the well-being of the environment, whereas Hassan et al. (2019a, b) and Ahmed et al. (2020a, b) reported the opposite.

This study seeks to examine the NR–EF nexus in South Africa by considering the role of human capital and urbanisation. This study is super useful for South Africa, where economic advancement has intensified NR extraction, especially coal, due to large energy demand and the desire to earn foreign exchange. Unlike Japan, Germany, the USA, Italy, France and other developed countries, South Africa generated 94.6% of its electricity from coal sources in 2005, 94.7% in 2006, 93.7% in 2013, and 92.7% in 2015. Although it reduced to 88.0% in 2017, South Africa had a coal power generation capacity of 39 GW as of 2018 (World Development Indicator (WDI), 2019). Coal is a non-renewable energy source that increases the emission of noxious gases capable of causing environmental deterioration. Recent studies have alluded to the adverse effects of coal consumption in South Africa (Joshua et al. 2020; Joshua, Bekun 2020; Magazzino et al. 2020; Udi et al. 2020). As a result of being the biggest economy in Sub-Saharan Africa (SSA), the urbanisation rate—as well as CO₂ emissions—have been on a stable rise in South Africa (Ndoricimpa 2017; Salahuddin et al. 2019). The urbanisation rate was 64.31%, 64.82%, 65.30%, 65.85%, 66.35% and 66.85% in 2014, 2015, 2016, 2017, 2018 and 2019 respectively (WDI, 2019). South Africa is currently the 14th highest emitter in the world (Salahuddin et al. 2019).

The excessive exploration of NR could impact the EF (Zafar et al. 2019). Natural resources such as forest and croplands reduce human-caused emissions (Panayotou 1993; GFN 2018), whereas resources such as coal and oil decline environmental quality (Ahmadov, van der Borg 2019). The link between NR consumption/exploration and economic growth cannot be overemphasised. The early stage of development is associated with increased energy demand with little attention to environmental quality. As the economy expands further, the demand for renewables, energy-efficient commodities, a clean environment and NR preservation is desired. Thus, environmental quality improves. This is the intuition behind the Environmental Kuznets Curve (EKC) hypothesis (Nathaniel et al. 2021a).

To curb environmental degradation, sustainable management practice is required for resources to regenerate. Education and skilled human capital are needed for the sustainable consumption of NR. Education creates the required awareness to adopt environmental-friendly and energy-efficient technologies (Nathaniel et al. 2021b; Zafar et al. 2019). A skilled human capital contributes to a nation's economic growth and also sees the need to uphold environmental quality. For these reasons and more, this study considers human capital in the NR–EF nexus for South Africa.

The contributions of this study are as follows: (i) This is a seminal study to investigate the relationship between NR, human capital, economic growth, urbanisation and the EF in South Africa's context. Additionally, previous studies on South Africa have overlooked this important demographic variable—human capital in the growth-environment nexus. (ii) The introduction of the interaction term between urbanisation and human capital will help to identify some of the new dimensions of urban sustainability. This will expose the importance of human capital development in enhancing environmental quality as the country seeks to attain the Sustainable Development Goals by 2030. (iii) This study applies robust econometric techniques, including the Bayer and Hanck (BH) (2013) combined cointegration test and the autoregressive distributed lag (ARDL) bounds test approach. These econometric procedures accommodate time-series issues, account for structural breaks and produce reliable results (Ahmed et al. 2020a).

The EKC is the theoretical basis for this research. The EKC was developed in a bid to explain how economic growth will continue to accelerate environmental deterioration at the early stages of economic expansion until it reaches a maximum point where the nexus between both becomes negative. The major intuition behind the EKC hypothesis is that environmental degradation declines with income after a threshold. It has been noted in recent studies that changes in the relationship between economic growth and environmental deterioration are not ‘exogenous’ processes, but could be influenced by some factors and economic policies (Copeland, Taylor 2004). As such, Dasgupta et al. (2002) posit that economic variables/policies are capable of influencing the shape of the EKC as well as the relationship between environmental degradation and economic growth. Hence, we included other variables such as urbanisation, human capital and NR as potential factors that can influence environmental degradation in South Africa. Table 1 presents a summary of recent studies on the EF determinants.

In summary, the influence of NR as well as urbanisation on the EF is still murky. There is no consensus as regards the impact of NR and urbanisation on environmental quality. The discrepancies in the existing studies could be attributed to the choice of the dataset, estimation technique(s), the region/country considered and the choice of variables/environmental indicator. Additionally, human capital is seldom considered as a potential determinant of the EF, and there is not any known study that has addressed this issue for the case of South Africa. Hence, the present study intends to fill this viable gap.

This section presents the plots of the series.

Figure 1 reveals that the EF, human capital and urbanisation have been on the increase in South Africa. Additionally, economic growth and NR have been fluctuating over time.

Fig. 1

From Table 3, it can be perceived that NR is the most volatile of the variables. The EF is negatively skewed and all the variables are platykurtic. The probability value of 0.030 suggests that the series of human capital is not normally distributed. Unit root tests are needed to select the appropriate estimation technique. The Ng Perron (2001) and DF-GLS (Dickey-Fuller Generalized Least Squares) tests (Table 4) confirmed a mixed order of integration, whereas the ZA test (Table 5) affirmed stationarity at I(1). Structural breaks exist in the series of the EF, economic growth, NR, human capital and urbanisation. These breaks are due to the economic and political reforms in the country.

The cointegration results in Tables 6 and 7 confirmed long-run interactions among the variables. From Table 6, the F-statistics from the three models is greater than the critical values at 5% levels. This further affirmed the existence of cointegration. The BH test requires the values of both EG − JOH − BO − BDM and EG − JOH to be greater than the 5% critical values for cointegration to exist. Since that is the case in Table 7, we cannot deny the existence of cointegration.

Table 8 shows consistent long-run results as regards the impact of each of the explanatory variables on the EF. From the findings, urbanisation, NR and economic growth increase environmental degradation, whereas human capital decreases the EF. The South African economy is energy-dependent (Magazzino et al. 2020). The country consumes more non-renewable energy sources, especially coal. Non-renewable energy sources are finite and high in emissions. Their impacts on the environment could be far-reaching. This outcome corroborates the findings of Liu et al. (2020) for G7 countries and Ulucak et al. (2020) for Brazil, Russia, India, China and South Africa (BRICS).

The impact of NR on the environment depends on the nature of the resource and how it is being explored. In South Africa, coal is one of the most explored resources. Studies—including those of Joshua et al. (2020) and Udi et al. (2020)—have confirmed coal consumption to be particularly harmful in South Africa. However, Kongbuamai et al. (2020), Zafar et al. (2019) and Al-Mulali et al. (2015) discovered NR to be a driver of environmental sustainability in ASEAN, the United States and Vietnam respectively. This finding supports the fact that the consumption and exploration of NR have not been sustainable in South Africa. South Africa generates 95% of its electricity from coal—a non-renewable energy source that pollutes the environment. From the results also, urbanisation contributes to environmental degradation by increasing the EF. This outcome complements the findings of Nathaniel et al. (2019), Salahuddin et al. (2019) and Sarkodie and Adams (2018) for South Africa, and the findings of Al-Mulali et al. (2015), Fan and Zhou (2019) and Fan et al. (2019) for Vietnam. The finding is intuitive because urbanisation drives economic growth and other activities that encourage energy consumption.

Unlike urbanisation and economic growth, the coefficient of human capital is negative, which suggests that human capital enhances environmental quality by reducing the EF. Over the years, human capital has played a vital role in the country's drive for economic prosperity/development. An educated human capital demands clear energy, contributes meaningfully to the financial system and ensures the sustainable use of NR for a stable growth path (Zallé 2019; Ibrahim, Sare 2018; Ogundari, Awokuse 2018).

Interestingly, the coefficient of the interaction term is negative and significant suggesting the moderating role of human capital in mitigating environmental degradation in South Africa. Although urbanisation increases the EF, its interaction with human capital reduces it. The intuition from the finding is that human capital is sacrosanct for urban sustainability. The validity of the EKC is confirmed evident from the positive/negative coefficient of GDP/GDP² in Table 7, Model 3. The short-run results are consistent with those of the long run. However, the impact of human capital on the EF is not consistent in the short run. The short-run evidence affirmed that human capital has an insignificant impact on the EF. As such, there is a need for human capital development to curb environmental degradation.

The fully modified ordinary least squares (FMOLS), dynamic ordinary least squares (DOLS) and canonical cointegrating regression (CCR) results in Table 9 confirmed the robustness of our findings in Table 8. Therefore, a similar discussion/interpretation applies.

In Table 10, a bidirectional causality exists between economic growth and NR, economic growth and the EF, and between human capital and the EF. This reveals that NR play an important role in South Africa's growth trajectory and also contributes to pollution. The causality relationship schema is presented in Figure 2.

Fig. 2

The Cusum and Cusumsq plots for each of the models (Figs 3–5) confirmed that the models are stable and can be used for forecast.

Fig. 3

Fig. 4

Fig. 5

This study examined the relationship between human capital, urbanisation, economic growth, NR and the EF in South Africa. The NG-Perron and DF-GLS unit root tests affirmed a mixture of I(0) and I(1) for the variables, whereas the BH test affirmed a long-run relationship among the variables in the estimated models. The ARDL, FMOLS, DOLS and CCR results showed that urbanisation, NR and economic growth increase the EF, whereas human capital promotes environmental sustainability in the long run. The results validated the EKC for the EF in South Africa. A bidirectional causality exists between economic growth, NR and the EF. Also, urbanisation and NR drive the EF in South Africa.

These findings emphasise the need for policymakers in South Africa to adjust the country's energy portfolio and encourage the consumption of renewables (such as solar, wind, hydropower and geothermal power). These energy sources are clean and low in emissions. They are environmentally friendly and sustainable (Nathaniel, Bekun 2020; Ali et al. 2020). The transition to clean energy sources might not be an easy sail considering South Africa's financial strength, but creating awareness, providing the household with palliatives (subsidies, interest rate holidays, tax, etc.) and encouraging firms to embark on cleaner production while taxing the dirtier ones could be a good step in the right direction. Moreover, there is a need to concentrate on NR that are less of a pollutant and ensure their sustainable exploration, without altering the country's growth process.

Development issues, such as lack of amenities, inequality and low income, are the main causes of the urban explosion. The concentration of infrastructures in cities like Cape Town, Durban, Pretoria and Johannesburg and a dearth of such infrastructures in, e.g., uMgungundlovu, Nkangala and Ntabankulu will only encourage urbanisation, as people will prefer cities to rural areas. The need for smart cities cannot be overemphasised. Smart cities promote the efficiency of urban services, such as energy and transport, to achieve innovation and sustainability. Most importantly, human capital needs to be developed in South Africa for sustainable cities, energy and resources. Once human capital is developed, the consumption of clean energy sources will increase and the preservation of biodiversity will be a priority.

This study has some limitations. For instance, some determinants of the EF were not considered in the estimated models. This is a pointer for future researchers in this field. Additionally, future studies may want to explore the moderating role of income inequality and governance on the EF and other sustainability indicators by applying robust estimation technique(s). The sample could also be extended to include more emerging economies for a more reliable policy formation. There are more global perspectives to this study, and it is highly relevant to international readers and policymakers outside South Africa. Countries are expected to comply with the Kyoto Protocol and the Paris Agreement of 2015 by consuming renewables and reducing the demand for fossil fuels, since these energy sources are harmful to the environment. The mitigation of pollution could be achieved by engaging in cleaner production and consumption. Additionally, investing aggressively in the green energy sectors will encourage the development of cleaner production technologies.