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Shock findings on how decreased water quality and quantity could affect SA economy

Any decrease in the quality, and therefore usability, of water in South Africa by 1% may result in the loss of 200 000 jobs, a drop of 5,7% in disposable income per capita, and an increase of 5% or R18,1 billion in government spending.

These are some of the thought provoking findings of an economic impact study commissioned by the trade union UASA to establish the real impact of the South African water crisis on the country.

The study forms part of UASA’s ongoing Water Security Campaign and was conducted by independent economic research and advisory firm Plus Economics, headed by its CEO Prof Charlotte du Toit, also professor extraordinaire in Economic Modelling at the Bureau of Market Research, UNISA.

The findings of the study were made public this morning [15 November] at a media conference in Johannesburg.

In her presentation, Du Toit said additional macroeconomic effects of decreased water quality include a rise in the ratio of government debt to Gross Domestic Product (GDP) to 28%, a drop of R16 billion in household spending, a drop of 1 percentage point in the GDP growth rate as well as a drop of R9 billion (2,5%) in total fixed investment.

“A decrease in the quality of water will have negative and different effects on the individual economic sectors. Among our findings are that growth in the electricity, gas and water sector will decrease by two percentage points, and that as many as 14 000 jobs may be lost in the financial services sector,” she said.

Du Toit also discussed the effect of a decrease in the quantity of water available on the different economic sectors. She said that if a decline in the final availability of water supply of e.g. R10 million was assumed (which would need to be supplemented from other sources, including desalination of sea water and towing of ice-bergs to our shores and melting them), the study showed the following effects can be expected to manifest:

  • Agricultural output will drop by  R570 000
  • Mining output will decrease by R1,1 million
  • Manufacturing output will drop by R7 million
  • Electricity output will drop by R1 million
  • Tourism output will decrease by R2,3 million
  • Financial services output will decrease by R4,6 million
  • Transport and communication output will drop by R2,3 million
  • Community and social services output will drop by R5,4 million

Du Toit said this means that the total economic output would decrease by R41,7 million and the compensation of employees by R5,4 million.

“For every one job lost in the water sector, a further two jobs are lost elsewhere,” she said.

Similarly, Du Toit showed how a decline of R10 million in the availability of usable water for manufacturing (based on the fact that manufacturing is a key sector with strong backward and forward inter-industry linkages, and is responsible for more than 30% of household spending) would result in a decrease in total economic output of R51,5 million while the decrease in employee compensation would decrease by R7,8 million as a result of a decrease in the quantity of water available. “For every one job lost in the manufacturing sector, a further 12 jobs are lost elsewhere,” she said.

The effect of a decreased quantity of water available on the community, social and personal services sector looks even more frightening: the total economic output of this sector will decrease by R106 million and the compensation of employees in the sector by R11,4 million.

Du Toit said that further research and proactive solutions to the problem were required, which hopefully would in future culminate in a Consolidated Water Management Index (CWMI) for the country.

According to André Venter, spokesperson of UASA, it may seem strange for a trade union like UASA to get involved with such a huge socio-economic issue such as a water crisis.

“As a labour organisation representing over 75 000 members who are not only workers but also citizens of South Africa, we have made a point of pursuing the issue to the advantage of not only our members, but of all South Africans. All South Africans, including our members, are suffering the negative effects of the current water security situation. This is why we started the UASA Water Security Crusade, also known as H20 4 Life, in the first place,” says Venter.

Koos Bezuidenhout, CEO of UASA, says the report will help South Africa to gain a better understanding of the crucial role of water and start to appreciate the real value of water in our daily lives.

“The outcomes of the economic impact study by Plus Economics are extremely thought provoking and useful. I believe for the first time we can clearly see the real role of water in the South African economy. We now have confirmation that water can no longer be taken for granted.

“As UASA has urged before, water needs to top all the agendas in the country and we need to develop a new respect for this precious commodity,” says Bezuidenhout.