Despite a global understanding of and emphasis on water as a scarce resource, South Africa is not taking sufficient cognisance of the future risk of water security and its potential impact on business and the domestic, industrial and mining sectors, says research and consulting firm EY climate change and sustainability services associate director Thomas van Viegen.
“South Africa needs to navigate the risk of water scarcity, particularly the associated business risks, and [determine] an encompassing strategy for water security for the next ten years,” says Van Viegen. He adds that industry still does not understand water scarcity and security in terms of business risk and risk profiling.

Van Viegen suggests that water crises could occur if countries do not adapt to climate change, noting that water- and climate-related risks, listed sixth in the World Economic Forum’s (WEF’s) ‘Global Risks 2015’ report, indicate a “greater incidence of extreme weather, such as floods, fires and storms” – all of which have occurred in South Africa over the past year and a half.

The report also rates water crises as “the greatest risk” worldwide, with countries’ failure to mitigate and adapt to climate change ranked fifth in the top ten global risks. In the 2014 WEF report, water scarcity was ranked third on the global risk register in terms of business risk – above aspects such as global governance failures.

Van Viegen highlights that a new entrant in EY’s 2014/15 report, which ranks business risks for the mining and metal industries internationally, is the risk of access to water and energy, which is ranked tenth among the top ten business risks.

“Access to affordable water and energy is becoming increasingly difficult, particularly in South America and Africa, while increasing energy costs and competing water demand in several mining and industrial areas are starting to have a greater impact on costs, operational abilities and liabilities,” he says.

Moreover, with the global demand for energy expected to increase by 36% by 2025, this risk is compounding each year, says Van Viegen, emphasising that water scarcity is also an issue demanding strategic and practical response.

Water risk is flagged in the Greenbiz’s ‘State of Green Business 2014’ report, which focuses on sustainability risks for business. However, Van Viegen notes that, while water featues more on companies’ radars as a key risk, this awareness did not translate into action, as the Greenbiz 2014 and 2015 reports indicate a slow uptake from businesses regarding water security.

Business Consideration
Van Viegen recommends several considerations for businesses and industry, emphasising the paradigm shift needed with regard to water use and its future risk profile.

“It is imperative that water should feature on a company’s risk register to ensure that it is easy to identify any related business risks,” he stresses, further highlighting the increasing pressure from investors to investigate portfolios in South Africa. “Institutional investors are attempting to divest from high water-risk investments, placing increased focus on businesses’ management of scarce resources.”

Further, Van Viegen believes that increased water scarcity in South Africa will result in an increase in the price of water, adding that the South African water-pricing tariff has been unrealistic.

Van Viegen also notes that companies should consider resource use management and that, because water is a shared resource, there should be shared responsibility and sufficient management in industry.

He also explains that, as there are multiple demands on the same resource, there will be increased competition over the next ten years for currently stressed resources, particularly water and land, for domestic, agricultural and industrial use, notwithstanding conservation requirements.

“We need to significantly consider the water risk South Africa is facing – which is key. Local industry stakeholders need to be proactively involved across all spheres, particularly when considering creative partnerships between the private and public sector to manage water-quality issues.”

Van Viegen believes that industry is still in a difficult position, however, as the economic growth and development path favoured in South Africa’s National Development Plan is significantly water intensive.

“We need to accelerate development in the country but we need to do it responsibly and evaluate the sustainability of this growth path in the long term, as South Africa cannot afford a water-intensive growth development strategy when facing water stress,” he concludes.