South Africa faces a new Eskom-sized crisis

If South Africa’s water issues reach crisis-level, it could hit the country’s growth as hard as Eskom’s struggles to keep the lights on once did.

A water crisis in South Africa would require compound failure in multiple areas, including multi-metro outages and bulk supply shocks, with the country already seeing weaknesses in several of these factors.

This is feedback from Efficient Group economist Dr Francois Stofberg, who recently outlined some risks to South Africa’s growth trajectory.

While the country is currently on a strong path to growing its economy faster than it has over the past decade, Stofberg said certain domestic fragilities pose a risk to this outlook.

One such fragility is water infrastructure and weak municipal finances, with Gauteng already experiencing severe outages.

Stofberg warned that “a water crisis could hit growth as hard as Eskom once did”. 

At the height of load-shedding, rolling blackouts were estimated to negatively impact the economy by between -0.7 and -3.2 percentage points.

Stofberg told Daily Investor that, for a water crisis to hit growth as hard as Eskom once did, South Africa would need to see a compound failure across four areas.

The first is simultaneous multi-metro outages in major cities like Johannesburg and Cape Town that last weeks, not days.

Currently, water outages across the country have been highly sporadic and concentrated, with taps in some areas running dry for weeks on end and others only for a few hours or days.

The second is bulk supply shocks, such as low dam levels, problems with raw-water conveyance, treatment-chemical shortages, and extended plant downtime.

Sipho Mosai, the CEO of Rand Water, a bulk water supplier that supplies water to several metros across four provinces, recently outlined the threats facing local bulk water suppliers.

He explained that municipal non-payment for water services is placing severe strain on the bulk supplier’s ability to function.

“I think we’re still fine for now. We are able to raise capital in the marketplace, but in the long term, it’s a matter of serious concern for us,” he said.

The devastating effects of South African municipal debt on a bulk supplier’s finances have been clearly seen with Eskom.

Municipal debt to Eskom is one of the main reasons for the utility’s financial struggles and has cost the national fiscus billions in government bailouts.

Dysfunction at many of South Africa’s municipalities is also a major risk to the country’s water supply.

Water crisis growing

The third risk Stofberg highlighted is distribution collapse at the municipal level, such as leaks, pressure management, and non-revenue water, without rapid provincial and national support.

Several local water experts have previously explained that South Africa’s water challenges are not necessarily due to a shortage of water.

Instead, a large part of the problem stems from non-revenue water, which refers to the difference between the amount of water injected into the water supply system and the actual amount of water billed to customers.

The 2023 No Drop Report found that the country’s non-revenue water increased from around 42% in 2014 and 2015 to above 46% between 2021 and 2023.

“It is not a water scarcity issue. It is an institutional failure issue,” Water expert Dr Anthony Turton previously explained.

In other words, this water does not reach an end user but is, instead, lost through leakages and theft.

This makes it increasingly difficult for bulk water suppliers to maintain sufficient pressure to get water from their facilities to reservoirs in major cities and to the end user.

The fourth and last risk Stofberg noted was limited private mitigation through options like backup storage or bore holes and industrial curtailments in water-intensive nodes at the same time.

One of the major reasons Eskom has been able to keep load-shedding at bay over the past two years has been the rapid uptake of alternatives like solar panels in the private sector.

Nedbank’s latest Energy Tracker showed that energy demand has fallen below its 2019 to 2021 average and has remained there, with average demand in 2025 one terawatt (TW) below the historical average. 

In addition, while Eskom’s dispatchable generation has increased above its 2023 levels, it remains well below historical averages.

This shows that private sector investment in renewable energy has driven a permanent decline in demand for electricity from Eskom over the past two years.

Similarly, South Africa has seen some private sector investments in alternatives for water supply, but this has yet to reach the level of alternative energy investments.

High risk, low probability

While all of these factors present a significant risk to South Africa’s water supply, Stofberg said the probability of all of these factors occurring simultaneously is low.

He specifically noted that rising attention to South Africa’s water problems, growing private back-up capacity, and the ability to mobilise emergency procurement make this the worst-case scenario.

In other words, while it is possible for all of these factors to place pressure on water supply simultaneously, there is quite a low probability.

However, should the worst-case scenario happen, Stofberg warned it would have severe consequences for the country’s economy, similarly to the effects of peak load-shedding.

Stofberg estimated a water crisis would result in a temporary hit of roughly 0.5 to 1.0 percentage points to South Africa’s GDP over 6 to 12 months.

He said this hit will be concentrated in the manufacturing, mining, food processing, and hospitality sectors.

He added that a water crisis would likely lead to localised and short-lived disruptions, estimating a 0.2 to 0.4 percentage points drag for a quarter or two, then payback as supply normalises.

Stofberg also highlighted some mitigants that could soften the blow of a water crisis, including rising on-site storage and boreholes, staggered production, tanker supply, and substitution where possible.

“So, the national impact is likely smaller and shorter than the power shock,” he said.