South Africa is experiencing its worst drought in decades. The nation’s water supply is dwindling as Day Zero, the date in April during which the faucets will shut off, rapidly approaches. Currently, residents in the Cape Town province are limited to a mere 25 liters of water a day, roughly the amount used during a 4-minute shower. The impending shut-off will have substantial economic consequences for the South African economy, as well as surrounding countries.
South Africa’s economy is predominantly supported by its affluent agriculture and tourism industries, but that may soon change. The water crisis will strain the nation’s GDP, threatening employment and production levels, as all eyes will be on the most severely affected area, the Western Cape Province. The Cape province is the single largest contributor to the nation’s GDP. It is a beacon of activity, contributing 23% of the nation’s agricultural revenues and a considerable 13% of the nation’s total GDP. Moreover, the Western Cape accounts for about 20% of the country’s total agricultural labor force, with the sector having shed 84,000 jobs in the first half of 2017 due to drought. A further contraction will increase unemployment even more.
Farmers will suffer production losses, spiking prices for the already short supply of produce. What little water is left will be put towards irrigation, ensuring that there is still a sustainable food source as a buffer against the rampant health problems that plague the country. Not only will the nation’s food source suffer drastically, but so will the nation’s growing wine industry. Vineyards have been promised a mere 17% of the water they typically use to grow their grapes. This will put pressure on the industry, reducing the amount they export and straining the agricultural industry even further.
The water crisis’ effect on the tourism industry, an industry that accounts for roughly 10% of the nation’s GDP, will quickly become apparent in the upcoming months. Tourists may begin to seek vacations elsewhere as tempers boil over once the faucets run dry. The amenities tourists generally receive such as showering will be sought elsewhere. A drop in the number of visitors will put the economy in peril since many businesses depend on tourists for their revenue. The Cape Chamber of Commerce expects that around 7% of businesses will shut down on Day Zero and another 11% will send their employees home. Employment and GDP levels will receive a second blow as a result.
As South Africa bears the brunt of the water crisis, many surrounding smaller nations, such as that of Lesotho, will experience a spillover effect of refugees. Since income inequality pervades South Africa, rising prices and an inaccessibility to water will displace the growing populations in major cities. Once Day Zero happens, tensions may even ignite class warfare that turns city streets and neighborhoods into hostile zones. Though neighboring countries with water will experience a surge in business, they may not be able to accommodate the flood of impoverished refugees leaving South Africa. A destabilization in the major economy of the Southern part of Africa could cause a ripple effect throughout the region. Furthermore, an influx of refugees could accelerate the water shortages that are beginning to spread across other African nations.
Overall, the water crisis in South Africa will have substantial consequences. Some economists suggest that in the long term, there will be emerging opportunities for unlisted infrastructure debt and equity in bulk waste water treatment and desalination plants. Organizations such as Public Private Partnerships could potentially offer a meaningful long-term solution for the City of Cape Town and other metropolises by bringing financial resources and technical skills which would otherwise be challenging to mobilize. Even so, the worst is yet to come and South Africa is bracing for the impact. As climate change continues to wreak havoc on the globe, we must take the initiative and prevent such problems from occurring. South Africa must serve as an example for future water crises.