IS WATER SHEDDING NEXT? James Blignaut and Jan van Heerden Department of Economics, University of Pretoria

STRUCTURE 1 Pictorial introduction 2 The SA water context 3 ASGISA and water 4 Conclusion

1PICTORIAL INTRODUCTION

Photos: Prof RJ v Aarde WATER – Increasingly the limiting factor to development; Increasingly the factor of divide; Manage water and you will manage the economy, failing that implies failing the economy

2THE SA WATER CONTEXT

The challenge The availability of water of acceptable quality is predicted to be the single greatest and most urgent development constraint facing South Africa. Virtually all the surface waters are already committed for use, and water is imported from neighbouring countries. Groundwater resources are quite limited; maintaining their quality and using them sustainably is a key issue. (Scholes 2001)

DWAF 2004; NSOER 2005/DEAT 2006; SSA 2006

Farley and Gaddis, in Aronson, Milton and Blignaut 2007 Interaction between the supply & demand for natural capital: The value of the last remaining 1.4% of water is very high (both level and unitary change matter) Critical natural capital Perfectly inelastic demand Vulnerable natural capital Inelastic demand Relatively abundant natural capital Elastic demand Natural capital stock Q 1 Q 2 Marginal exchange value Demand for Nat. Cap.

DWAF 2004; NSOER 2005/DEAT 2006; SSA %! Water shedding??

3ASGISA AND WATER

ASGISA’s perspective to SA’s economic development: Stimulate these 12 sectors: 1.A national biofuels initiative; 2.The Makhathini Cassava & Sugar Project KZN; 3.A national livestock project in NC and NW; 4.Afforestation in EC; 5.Mining expansion in Limpopo; 6.A water reticulation project in Limpopo; 7.The Square Kilometre Array in NC; 8.The Cape Flats Infrastructure Project in the WC; 9.A diamond & gemstone jewellery project in NC; 10.A Moloto Corridor Rail Project, mostly in Mpmlga; 11.Gauteng-Durban Corridor; and 12.The Jo’burg Intern. Airport Logistics Hub and IDZ.

More and more, the complementary factor in short supply (limiting factor) is remaining natural capital, not manmade capital as it used to be. For example, populations of fish, not fishing boats, limit fish catch worldwide. Economic logic says to invest in the limiting factor. That logic has not changed, but the identity of the limiting factor has. (Herman Daly)... another perspective...

Quantifying the impact of stimulating some water-intensive sectors UP’s SAM-based integrated economy/ environment CGE model using GEMPACK Papers based on this model published in: The Energy Journal Ecological Economics Water Resources Research South African Journal of Economics South African Journal of Economic and Management Sciences

Quantifying the impact of stimulating some water-intensive sectors Measuring the impact on GDP, employment, water use and CO 2 Scenarios: Hypothetical R1billion injection in 6 water-intensive sectors 1c/m 3 increase in water tariff Balance budget: 1c/m 3 increase in water tariff, but revenue recycled to 6 water intensive sectors

Model results: % change in GDP Unskilled Water useCO 2 -emssions labour Scenario 1: R1bn injection in - Dryfield agriculture Irrigation horticulture Livestock Timber Other mining Water sector Total Scenario 2: Water tariff inc. 1c/m3 (no recycl.) Scenario 3: Water tariff inc 1c/m3 & recycl. - Dryfield agriculture Irrigation horticulture Livestock Timber Other mining Water sector Total (Ave.) Water use impact worsen in the wake of: presence and spread of invasive alien plant species, and global climate change Unallocated water = 1.4% of supply

4CONCLUSION

SA needs economic development Increasingly, however, natural capital is the limiting factor to development Selection of non-water intensive projects key to development; OR get water from other sources Cannot ignore the limiting factor when considering macro-economic policies and development planning ASGISA could be utilised to act as catalyst for development when investing in integrated packages, otherwise water shedding might be next (and soon) Water shedding will behave different from load shedding with a delayed feedback loop, which could lead to ill-founded complacency while action is needed