Western Cape Water Crisis Will Impact SA’s GDP – Economist

Updated on 8 February 2018

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Western Cape water crisis
Capetonians queue at the Newlands spring for water/ANA

The Western Cape water crisis has far reaching consequences not only for the province, but also for the national GDP and is likely to impact South Africa’s overall growth for 2018, according to  Rian Le Roux, Economic Strategist at Old Mutual Investment Group (OMIG).

In a statement last week, Moody’s Investor Services indicated that the water crisis poses a credit risk to Cape Town’s debt rating, which is currently rated at the lowest level of investment grade – Baa3.

With Level 6B restrictions having come into effect and Day Zero still looming, Le Roux said it was important to acknowledge the knock on effect that the Western Cape water crisis is likely to have on South Africa’s overall growth in 2018.

“The Western Cape accounts for approximately 13% of the national GDP, and a 1% reduction in the Western Cape 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%.”

According to Le Roux, revenue collected from water usage in Cape Town currently makes up about 10% of the city budget, and as water usage decreases so will the city revenues.

He said that on top of a revenue shortfall, the city would need to spend more on emergency services and infrastructure, placing additional financial strain on city funds.

He said that while water demand was increasing at a higher rate than population growth, on the other hand water availability was declining due to competing demands for agriculture and industry, from deteriorating quality and climate change.

Le Roux said that the water crisis was not exclusive to the Western Cape: “The Eastern Cape is experiencing a severe water crisis too, and Gauteng currently has Level 1 water restrictions in place. Rand Water has also recently placed a limit on its water supply in order to stay within permissible limits, having exceeded the allowable licence limit.” (via African News Agency)

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