New South African crisis worse than load-shedding

South Africa’s water crisis, driven by underinvestment, ageing infrastructure, climate change, and excessive demand, poses significant economic risks for the country’s citizens and businesses.

Coronation economist Marie Antelme explained on the Corospondent podcast that although South Africa’s water crisis has often been compared to load-shedding, it is much more complicated and dangerous. 

“Like load-shedding, the crisis stems from system failures, years of underinvestment and poor maintenance, inadequate planning,” Antelme said. 

“Both crises carry a high economic cost, and at least part of the solution will need the public and private sector to work together.”  

However, there are really important differences, she pointed out. 

“While it’s inconvenient, it is certainly possible to live without electricity, but it is not possible to live without water. This is an altogether different crisis.” 

“The second thing is that Eskom is a centralised parastatal generating and transmitting electricity across the country.” 

“Water is a limited national resource, but it is also a much more complex system, and most of the immediate challenges are specific to localities.” 

Antelme explained that the scope of the water issue is both broad and complex. 

“Just to begin with, South Africa starts off as a water-scarce country. On average, we get 460 millimetres of rainfall per year compared to a global average of 860,” she said.

“The distribution of this rainfall across the country is uneven. Some regions, mostly in the east, get more rain, while those in the west get less.”

“These issues are affected by climate change, by ageing infrastructure, and in some areas regulations which are actually no longer fit for purpose, and all of these issues need to be addressed at the national level.” 

However, this is complicated by the fact that the challenges at the local level have their own individual characteristics. 

Gauteng, for example, gets most of its water from other parts of the country. 

“It uses water from the integrated Vaal River system, a system of 19 dams and rivers which moves water to regional reservoirs that are tapped for local supply,” Antelme said. 

“This process is also influenced by local demand and in some cases by electricity, which moves that water around.” 

“Excessive demand and interruptions to energy supply affect water in these reservoirs, and many of them are already leaking.” 

Although there have been interventions, progress has been slow, Antelme explained. 

“In 2004, The Lesotho Highlands Water project phase one was completed, supplying 780 million cubic litres of water to Gauteng.”

“The second phase, phase two, for an additional 490 million cubic litres, was set to be completed in 2019, but it was delayed, and construction only started at the end of 2022. This will now only be finished in 2028 or even later.”

“Until that time, the amount of water that is available for Gauteng is limited. So the system needs to balance this limited supply with a growing population.”

According to Antelme, Gauteng’s rapid population growth is also making it more difficult to address its water shortage problem.

“The population of Gauteng is 23% bigger than it was in 2011,” Antelme said. “And it’s not just population growth, it’s also consumption.”

“Gauteng consumes 279 litres per person per day. This compares to 173 as a global average and 218 for the national average.”

“And then on top of it, Gauteng water loss is chronic. 35% of treated water is either unbilled or it’s lost to leaks or it’s lost to illegal connections. So there are a lot of things which need to be addressed to improve the situation.” 

While South Africa’s water shortage crisis certainly impacts individuals, businesses are also feeling the strain.

“For some businesses, obviously, water may be a core input into the production process, and not having a reliable supply is an existential risk to those businesses,” Antelme said.  

Other businesses may experience supply chain or input disruption or increased costs due to operational inefficiencies caused by a lack of reliable water. 

“Even in commercial and professional services sectors where water may not be an input into the business operations, all businesses need drinking water and sanitation services for their employees.” 

She explained that even the Constitutional Court has recently been unable to hold in-person hearings because there isn’t a reliable water supply. 

“At last measure, there were about 23 million people living in Gauteng, and the province accounts for about 30% of the national GDP. KwaZulu-Natal is the second biggest province in terms of GDP at about 16%.”

“This means that almost half of the country’s GDP is exposed to regions which do not have reliable water resources to conduct business.”

Fortunately, Antelme said that a lot is being done to tackle this crisis, particularly at the national level. 

“The Department of Water and Sanitation and National Treasury have been doing a lot to address this crisis, but the challenge is complicated by the way in which the Constitution assigns different responsibilities to national, provincial, and local governments.”  

“National government oversees water resources while municipalities handle the delivery of water services.”

“One level of government can’t force another one to act. They must work together. That is especially tricky in areas with complex political dynamics.” 

Cooperation between government spheres is improving, but the DWS and National Treasury, specifically, have taken a number of key steps. 

One important thing the DWS has done, in particular, is reinstating drop reports, which haven’t been published since 2014.

These reports are vital for pinpointing areas that need intervention and consist of three different reports: Blue Drop for drinking water, Green Drop for wastewater, and No Drop for water loss.

DWS has also proposed a Water Services Amendment Bill to allow private licensing for municipal water services, while National Treasury introduced measures to improve water service management and attract private investment. 

Local interventions, particularly in Gauteng, are also underway, Antelme said. 

The National Treasury’s City Support Program is now part of metros’ turnaround strategies. It focuses on accountability and directs revenue toward maintenance. 

Johannesburg has implemented overnight pressure management to refill reservoirs and minimize leaks, while Rand Water and contractors support leak detection and repairs. 

The DWS launched the Gauteng Water Dashboard to monitor leaks and outages, aiming to make it interactive for better data quality. Illegal connections are being removed, and public education campaigns are promoting water conservation.

Meanwhile, municipalities owe over R23 billion to water boards, with two boards nearing bankruptcy, risking water supply disruptions. 

Efforts by DWS, National Treasury, and COGTA include withholding municipal funding until governance improves. 

Despite these challenges, a cyclical recovery into 2025 is expected, supported by lower inflation, real income growth, improving confidence, and planned investments, potentially including water-related projects, boosting GDP growth.

“The water crisis will certainly continue to have an impact on South Africa’s economic outcomes, but it is unlikely to derail the budding cyclical recovery we’re starting to see.”

“Seeing these projects start to break ground and maybe water-related capex will become a bigger part of this should also help improve the prospects of stronger GDP growth.”