Water stress in South Africa (as of 5 April 2012)
Water Stress is rapidly emerging as a key issue facing industry and investors in South Africa. Lack of water can hamper operations and development in a wide variety of sectors, from mining firms and agro-commodities producers to oil and gas firms involved in shale gas fracking. While water stress is a long-term environmental issue, it is also exacerbated by aging and poorly maintained water infrastructure. Increasing temperatures and changing patterns of precipitation associated with climate change are likely to further increase the risk of water stress in the country, posing particular challenges to businesses and investors in water-intensive industries.
A further risk associated with water stress are the long-term knock-on effects that can arising from a lack of water. For instance, an increased incidence of drought can in turn increase the frequency of wildfires which disrupt business operations and supply chains. This can then further push up operational costs through forcing greater corporate expenditure on compliance procedures and insurance. Rising water stress can also precipitate conflicts between domestic and commercial users, potentially creating further operational and reputational challenges for business. The availability of water in South Africa is already emerging as a limiting factor of economic development. Without substantial government action to address water stress, it seems likely that this issue will increasingly become a key political issue as well.