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Over the coming decades, South Africa will face constraints associated with water availability that will have a broad impact on its economy and could temper economic growth.
The water-intensive coal power production and mining sectors in particular will be impacted as South Africa is forced to resort to more expensive or imported sources of water. Agriculture, which remains the country's largest water-consuming sector, will likely face additional limitations. In the shorter term, rapidly growing municipal demand will also strain aging infrastructure. The dilapidated nature of much of South Africa's water infrastructure, along with other factors such as equipment theft, will likely contribute to an increase in localized water shortages like the one recently seen in Gauteng province.
Numerous towns in Gauteng province experienced acute water shortages throughout September after a key pumping station failed. This is just one of several similar water outages that have occurred throughout the country over the past year. While the immediate cause of the water failure is often due to the theft of wires and the resulting power outage, South Africa has often relied on aging infrastructure and engineering projects to distribute its limited surface water resources. After the end of apartheid culminated in democratic elections in 1994, this water system became increasingly stressed because Pretoria amended its constitution to make access to water a basic right for all, requiring the government to supply water to millions of citizens it had not served before.
The Cost of Aging Infrastructure
After apartheid ended, new infrastructure was built to meet the new demand. Still, even with the newer systems, the current weighted average age of South Africa’s water infrastructure is 39 years old, with much of it in need of repairs, updates and expansion. Water engineering projects are a significant part of the country's 2012 National Infrastructure Plan, and several of these projects are currently underway. However, an estimated 600 billion rand (roughly $54 billion) is needed over the next 10 years to maintain and ensure water supply for the citizens of South Africa, though less than half of this money has been financed. This current rate of investment and improvements may not be sufficient to meet the growing demands of South Africa’s population.
Furthermore, South Africa lacks people with the necessary technical experience. After abolishing apprenticeship systems, Pretoria has seen a reduction of civil engineers available to municipalities and a lack of people with the necessary training to manage large new projects and system rehabilitation, making its ambitious construction plans difficult to achieve.
Years of insufficient upkeep will make maintaining a reliable supply of water for municipal and industrial demand an uphill battle for the country. Estimates indicate that it will take 1.4 billion rand per year just to maintain the current infrastructure, and an estimated 37 percent of municipal water supplies are lost simply through leaking infrastructure, costing South Africa another 7 billion rand a year.
Stresses on the Power Sector
Water and power production remain intimately linked in South Africa. Many of the water shortages over the past year are attributed to power outages at the pumping stations, often caused by power or structural failures due to theft of copper wires and steel. Eskom, the company that provides almost all of South Africa’s power, is also struggling to meet rising demand with aging or insufficient infrastructure, resulting in regular blackouts. South Africa is building the large Kusile and Medupi coal-powered plants as part of a bigger plan to expand power production, but neither is complete and there have been delays, specifically at the Medupi plant, due to labor strikes and contractor errors. Additionally, the power sector in South Africa will continue to be constrained by the country’s water stress throughout the coming decades. The Medupi plant, which uses dry cooling and thus requires far less water than older coal-fired plants, will provide some relief if it begins operations mid-2015, as currently scheduled. Plans to build a third large coal plant to meet increasing energy demands are also being debated.
However, continuing to rely on coal as the primary source of electricity, especially in light of growing demand, could present a fundamental development constraint moving forward. Many of South Africa’s coal plants are old and inefficient, requiring more water use. There are plans to phase out roughly 10 gigawatts of this older capacity, with new capacity being added from non-coal sources such as natural gas, nuclear, hydropower, wind and solar sources. But the majority of the grid will continue to rely on coal as the main source of electricity. The water required to operate coal-powered electricity plants as well as the water required to mine and process the coal itself will further strain water resources. Despite these constraints, South Africa has little alternative but to continue relying heavily on coal for power production for the next two decades.
South Africa will likely remain a competitive coal exporter through the next 20 years. The coal-mining sector will be invariably restricted, however, if nothing is done to mitigate water scarcity, which could increase the cost of coal coming out of South Africa. Any additional costs will further constrain the sector, which is also coping with problems of labor inflation and the increasing cost of power. As limited natural water resources become more valuable, water-intensive energy sources such as coal may not be as competitive in the global market moving forward.
Demand Consumes Water Supply
Other sectors will also play a role in stressing South Africa's limited water supply. Agriculture remains the largest water-consuming sector in South Africa. While there are already irrigation caps in place to limit this, Pretoria could also increase food imports if additional water is diverted to other sectors; this would place additional limits on the country's economic growth, however. The municipal sector, the country's second largest water consumer, will see the fastest growth in water consumption, though it will also be plagued with infrastructural issues.
The power and mining sectors are large consumers of water as well, together accounting for nearly 10 percent of South Africa’s total water consumption. Specifically, the mining sector will likely see continued priority in water access due
to its importance to the economy, though it will also face the reality of limited water resources. Over
the next two decades, more mines will likely rely on imported water from neighboring countries and ones throughout the region. Ultimately, by 2030, total demand is expected to outstrip current supply by nearly 3 billion cubic meters per year, roughly 17 percent of total demand.
Pretoria will continue to face water-related constraints in the near-term due to insufficient infrastructure. To support the existing population, maintenance to infrastructure will be crucial. Expansion of both water and power infrastructure are also necessary to meet growing demands. Failure to adapt and address these shortcomings will likely result in more cases of acute water shortages and power outages in the short-term. In the long-term, limited water supplies will continue to have the potential to degrade the government’s ability to attain key goals such as reducing the income gap and increasing the size of the middle class. Altogether, theses impediments have the potential to temper South Africa’s economic growth over the next two decades.
Courtesy : Stratfor (www.stratfor.com)