Troubled waters in South Africa

Did you know Cape Town has been designated a disaster area by the city's mayor? It's true. 

What catastrophe could have struck down one of the world's greatest cities? Earthquake? Hurricane? Heat wave?

Actually, it’s water—or rather, the lack of it. According to Mayor Patricia de Lille, as of March 7, the city had only 113 days of usable water left before its taps run dry. And Cape Town is by no means the exception.

The whole of South Africa is facing water shortages and the situation is getting worse:

• 98% of available water supply is currently being used
• Water demand is expected to exceed supply by 17% in 2030
• 37% of clean water is lost through reported leakages 

We want to know how this has happened—and what, if anything, can be done about it.

Today is World Water Day. It's a day that has long been marked in my calendar. In my previous role, I was seconded to the World Wide Fund for Nature (WWF), based in Cape Town. I was there for a reason. Of all the myriad options for where I should be based, WWF International opted for South Africa because it was where I would be exposed to some of the toughest water-related challenges for people and business. 

While I was there, I saw first hand how lack of water was wreaking economic havoc. The recent drought had taken its toll on the agriculture sector in particular. In the fourth quarter of 2015, the agriculture sector lost 37,000 jobs, which pushed an additional 50,000 people below the poverty line and accelerated consumer inflation driven by rising food prices. This in turn shaved off 0.2 percentage points from the country's economic growth in 2015. 

Urgent action is required—and every single person in South Africa has a role to play: government, communities, and the private sector. Sustainable water-resource management requires not only an understanding of water supply and demand, but also creative thinking by all stakeholders about what the future might hold and what can we do to shape it.

That's why earlier this year, WWF, supported by BCG, hosted a “Future of Water” workshop to discuss specific scenarios and map out the path towards a water secure future. We recently published Scenarios for the Future of Water in South Africa, which lays out the workshop’s conclusions. It’s a call for collective action to deliver on four goals:

1. Become a water-conscious country with sufficient knowledge and skills in the water sector.
2. Implement strong water governance.
3. Manage water supply and demand regulations and protect water resources.
4. Become a smart water economy.

The private sector has a real role to play in better water resource management, and it makes economic sense too. The entire value chain is thirsty for water. For companies, the threat of not being able to find enough water—or the right quality of water—can impact plant operations, suppliers, and consumers who cannot use products for lack of water. At the same time it is a basic human need, a human right. It is critical for the ecosystems our economies and well-being are based on, for the river species we feed on, the forests that absorb our carbon emissions, and much more. 

Hence there is potentially intense competition for this precious resource. When you put all this together, there are significant water-related risks for many sectors. This risk takes three forms:

• Physical Risk. Not being able to find enough water, or the right quality of water to operate ones plants.
• Reputational Risk. Losing one’s "license" to operate because your business needs trump more essential human and ecosystem needs.
• Regulatory Risk. Not being able to comply with new rules and regulations.

So there is a real business case for mitigating water risk. But since water flows from river sources to the ocean, all stakeholders in a river basin are mutually dependent. Hence, collective action is vital. For example, in a water scarce river basin, it would not be useful to reduce your water use only to see your neighbor use that extra capacity before it gets to the community that needs it most. 

That real risk, combined to water users' mutual dependence, means real corporate water stewardship needs to go beyond the fence line. It must be about driving collective action, and supporting the development of smart and sustainable water governance at basin level. WWF, with BCG's support, have been pushing the thinking to help corporates turn water-related risk into an opportunity, even a sustainable competitive advantage for those who master it.