Authors: Nomfundo Mdluli and Janet Muzenda
Water security is a critical concern in South Africa, with far-reaching implications for multiple sectors, including the asset management industry. In 2024, we took a proactive step towards enhancing sustainability in our portfolio by incorporating water risk assessments into our stewardship activities. This initiative was part of our broader strategy to evaluate portfolio resilience under various scenarios, ensuring we can effectively mitigate potential risks related to environmental issues, including water scarcity and security.
Current state of water security
South Africa is a water-scarce country, receiving annual precipitation 50% below the global average of 860 mm[1]. The scarcity is further exacerbated by a combination of economic and social factors which include:
- a lack of investment in critical water infrastructure
- rapid urbanisation and population growth, which has also put increasing pressure on water resources
- approximately 45% of the water supply (produced and pumped water) being lost due to ageing and leaking infrastructure before it reaches the end user, contributing to a decline in drinking water quality
- poor water management which has led to severe consequences for individuals and businesses, including production losses, reduced profitability, and even harm to both animal and human life.
The 2023 South African Blue Drop Report [2] highlights a troubling decline in water system performance over the past decade. In 2014, 44 out of 958 systems achieved a score above 95%, but by 2023, this number had fallen to just 26. Moreover, 277 systems (29% of the total) were classified as critical in 2023, up from 174 in 2014. While major metropolitan areas like Gauteng and the Western Cape maintain relatively effective drinking water systems, provinces such as the Northern Cape and Free State have seen a higher number of underperforming or critically-conditioned systems. The report also reveals that 64% of wastewater treatment plants are at high or critical risk of discharging partially treated or untreated water into rivers and the environment.
Adding to the concern, an independent report[3] released in 2024 found that 87% of processed sewage fails to meet minimum standards. A tragic example of this failure is the ongoing water crisis in Hammanskraal which has persisted for two decades. In this case, raw sewage sludge from the malfunctioning Rooiwal treatment plant has contaminated the Apies River. By 2019, the water in the area was deemed unfit for consumption, and continued neglect culminated in a severe cholera outbreak in May 2023, resulting in 23 fatalities.
Criminal exploitation exacerbates the risk of social unrest
Criminal syndicates have increasingly taken advantage of South Africa’s water crisis, exploiting the country’s strained resources and fragile infrastructure for profit. These groups often engage in illegal activities like water theft, tapping into municipal or industrial water systems to redirect water for resale or illicit use, particularly in rural and underserved areas where enforcement is weaker. In some cases, they profit from selling contaminated or untreated water, exacerbating public health risks.
The rise of these criminal activities not only depletes the already limited water supply but also creates significant social tensions. As access to clean water becomes more limited, the inequality in water distribution deepens, increasing the potential for civil unrest. Communities facing water shortages may protest or engage in violent demonstrations, further destabilising regions already grappling with economic hardship and growing dissatisfaction with government responses. The exploitation of water resources by criminal syndicates poses not only a direct risk to public health but also contributes to social unrest, threatening the country’s stability and complicating efforts to resolve the water crisis.
Government’s intervention
The government has implemented several measures to address water related issues such as shortages and leakages. These include scheduled temporary interruptions in the water supply to ensure that available water is distributed more evenly across a region. These can involve capping water use in urban areas, restricting agricultural irrigation, and reducing industrial consumption. In severe droughts stricter measures, such as water rationing (setting limits over a specified period), may be imposed. While these helps conserve water in the short term, they can disrupt daily life and economic activities.
Another strategy is “water-shifting” which reallocates water from regions with lower demand to those with higher needs, ensuring critical services like drinking water and sanitation are prioritised. This requires advanced infrastructure, which may be lacking in rural areas. The government has also pushed for investments in water-saving technologies, infrastructure upgrades, and better conservation practices. The introduction of smart meters and enhanced monitoring systems helps detect leaks and inefficient use, improving overall water management.
The government has also initiated Operation Vulindela to provide technical support to the Department of Water and Sanitation, aiming to expedite the processing of water use licences. The target is to process 80% of all water use licence applications within 90 days. Fast-tracking these applications is to promote the efficient and sustainable management of water resources, supporting economic development, job creation, and environmental sustainability. Additionally, a National Water Resources Agency is being established to improve the management of water resources. However, resolving the issue calls for a multifaceted strategy in addition to an intervention in the skills and expertise.
Our collaborative approach to mitigation and adaption
Water security in South Africa is a multifaceted challenge that demands a collaborative approach from government, communities, and the private sector. As fiduciaries for our clients, we have a responsibility and the capacity to drive change by actively engaging with our investee companies and government bodies to influence decision-making. In the coming year, we will intensify our efforts to engage with key sectors identified as high risk. These include property and real estate companies, food producers and retailers and mining companies, focusing on the development and implementation of robust mitigation and adaptation strategies to address the growing water crisis. By fostering these conversations and actions, we aim to contribute meaningfully to the country’s long-term water security solutions.
As Theodore Roosevelt aptly stated,
“The conservation of natural resources is the fundamental problem.
Unless we solve that problem, it will avail us little to solve all others.”