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Economist warns of knock-on effect of drought

Publish date: 13 February 2018
Issue Number: 543
Diary: Legalbrief Environmental
Category: General

The drought, which has hit the Western Cape and Eastern Cape particularly hard, will have a knock-on effect throught the country, writes Legalbrief. The Western Cape water crisis has far-reaching consequences for the national gross domestic product (GDP) and is likely to affect SA’s overall growth in 2018, according to Old Mutual Investment Group economic strategist Rian le Roux. A Cape Argus report notes that last week, Moody’s Investor Services said the water crisis posed a credit risk to Cape Town’s debt rating, which was at the lowest investment grade, Baa3. Le Roux said it was important to acknowledge the knock-on effect the Western Cape water crisis was likely to have on the country’s overall growth in 2018. ‘The Western Cape accounts for about 13% of the national GDP, and a 1% reduction in the Western Cape’s GDP equates to a 0.13% reduction in the national GDP. Therefore, if the rest of the economy grows by 1.5% in 2018 and the Western Cape grows by 0%, the national GDP will be up by only 1.3%.’ Le Roux said the water crisis was not exclusive to the Western Cape. ‘The Eastern Cape is experiencing a severe water crisis too and Gauteng has Level 1 water restrictions in place,’ he noted.

Full Cape Argus report (subscription needed)

Accordingly, the national government is set to step in to manage the crisis. Minister of Co-operative Governance and Traditional Affairs (Cogta) Des van Rooyen is quoted in a Mail & Guardian Online report as saying: ‘Currently, efforts are under way to classify the drought as a national disaster. This process will be finalised on or before 14 February 2018. This will legally assign the responsibility to the national executive to coordinate the disaster.’ Last week's announcement potentially puts the ANC-led national government on a collision course with the DA-led Western Cape government, with opposition leader Mmusi Maimane having placed himself at the helm of coordinating efforts to stave off ‘Day Zero’, the day on which taps in Cape Town are expected to run dry. The report says the drought, although felt most acutely in the Western Cape, has also gripped the Northern Cape, Eastern Cape and parts of KZN.

Full Mail & Guardian Online report

See Policy Watch section

The National Treasury has given the Western Cape administration more time to spend R74.8m in disaster relief funds after the provincial government failed to spend the amount within the stipulated three-month period. A Cape Argus report notes that the national government allocated the funding last August with at least R40m diverted to agriculture for livestock feed, R20m to the City of Cape Town to assist in drilling into the aquifers and R14m for relief projects in Bitou and Theewaterskloof municipalities. The allocations came after the Western Cape in November 2015 applied for a provincial disaster declaration, which was approved by the national government last May, 19 months later. Briefing the joint meeting of portfolio committees in Parliament last week, National Disaster Management Centre head Mmaphaka Tau said the City of Cape Town, Bitou and Theewaterskloof municipalities have been given until 31 March to spend their allocated funds after they raised this with the National Treasury.

Full Cape Argus report (subscription needed)

Van Rooyen is pinning his hopes on Finance Minister Malusi Gigaba to make additional allocations for drought relief when he tables his Budget later this month. A Cape Times report notes that, briefing the media on the drought crisis, Van Rooyen said his department had already made a presentation to the National Treasury in light of the Budget estimates for the financial year starting in April. The allocation for the provincial disaster grant was expected to shrink from R213.4m to R130m in the next financial year, while the municipal disaster grant would increase from R300.6m to R370m, Van Rooyen said. ‘We hope that when the Minister delivers his Budget speech he might give an indication to make a provision for some of the challenges. The figures are not sufficient to deal with the magnitude of the problem we currently encounter,’ he said. Water and Sanitation Minister Nomvula Mokonyane said funds had to be reprioritised to ensure current allocations are utilised, as well as a demonstration of the need for additional resources.

Full Cape Times report (subscription needed)

Cape Town’s use of the term ‘Day Zero’ came under fire from Mokonyane in Parliament last week. According to a BusinessLIVE report, the Minister was briefing the Portfolio Committee on Water and Sanitation. Stressing that the drought was affecting other parts of the country as well‚ she said some areas in the North West had not had water in three years. ‘Day Zero’ was a phenomenon that had not been declared by the National Disaster Management Centre‚ said Mokonyane. The department maintained that Day Zero would not happen as there were interventions in place. ‘It’s not us who have said there is Day Zero ... We do not understand how some people‚ somewhere‚ decided to talk of Day Zero. It is not us‚’ she said. However, Maimane is quoted in the report as saying: ‘Day Zero still remains a possibility and defeating it will require a collective effort from households‚ businesses and all three spheres of government.’ The city has its sights set on turning off most taps and asking residents to queue at collection points for a daily allocation of water from 11 May.

Full BusinessLIVE report

EFF leader Julius Malema said the water crisis in Cape Town should be treated in the same way as areas where there has been water scarcity for years. A report in The Citizen notes that he said the water issue was a national concern and not just a Cape Town matter. The fiery leader cited the water scarcity in Giyani and Blouberg areas in Limpopo. ‘It must not be that because there’s white people in Cape Town we must hear a lot of noise … and since Cape Town is going to have a Day Zero they will feel what Giyani people have been feeling. So, let the water problem be resolved for the whole of SA and be resolved in Cape Town as well,’ Malema said. ‘Start in Giyani, let’s see if it’s real. Anyone with a solution of water, which is permanent, start in Giyani. Then the EFF will start lobbying – saying these are the people you must listen to,’ the report quotes Malema as saying.

Full report in The Citizen

The water crisis is ‘far too serious a matter’ for it to be left to politicians to deal with. A News24 report notes that this is the view of Accentuate CEO Fred Platt, who was speaking at the National Press Club in Pretoria last week. ‘I think the important thing to understand is that water is far too serious a matter to leave to the politicians. At the end of the day, civil society is very, very involved in politics, but something as fundamental as water, I haven’t seen the activism that I believe there should be,’ Platt said. Platt said Cape Town was the face of the country for the rest of the world and that it was imperative to show that the city was working together to improve the situation. Professor Anthony Turton, a specialist in water resource management, agreed with Platt and said the issue of water scarcity in SA had to be dealt with without political interference. He said the issues facing Cape Town and other cities could be tackled by forward thinking plans and a number of other smart strategies, which would include the involvement of big business. ‘We have to talk straight to each other, we have to be serious with each other,’ he said.

Full News24 report

The Eastern Cape government needs R7.7bn to deal with what it calls one of the worst droughts experienced in the province. A Daily Dispatch report notes that this was presented by senior Cogta officials to the Parliament's Water and Sanitation Committee last week. The report paints a grim picture of areas such as Joe Gqabi, where two dams are standing empty. The report said municipalities had exhausted their operational budgets on water tank supplies and other immediate interventions. The report states that the lion’s share of the R7.76bn needed – R7bn – is for Nelson Mandela Bay Metro. In Nelson Mandela Bay the metro’s two water sources in Kouga and Koukamma are very low. The report said a provincial drought technical team had been established and a water management plan was being developed with the help of the Department of Water and Sanitation. Some of the challenges highlighted in the report are non-adherence to drought mitigation strategies and dilapidated infrastructure.

Full Daily Dispatch report (subscription needed)