LIQUIDITY ISSUES

As drought-hit Cape Town faced the prospect of taps running dry, business realised that not only will companies have to conserve water – they will have to operate in a future with a lot less of it

LIQUIDITY ISSUES

When Africa’s top mining executives gathered at the 2018 Mining Indaba, they were encouraged to eat from biodegradable crockery and use paper serviettes. The organisers had briefed them on Cape Town’s severe water crisis, but for most delegates it must have been a novelty to wash their hands with waterless hand sanitiser after finding all the restroom taps turned off.

Across the road from the indaba, SA’s largest hotel and casino group, Tsogo Sun, was preparing to bring its own desalination plant on-line. After implementing a range of water-saving measures, the group now wants to ensure that hotel guests have enough water in the future. Some of its key properties, such as the Southern Sun Water­front, the Cullinan and Westin Cape Town, will go off the municipal water grid. ‘The current situation in Cape Town is going to become the new normal. We’ve got to be responsible as well,’ says Ravi Nadasen, Tsogo Sun COO.

The Western Cape drought with its looming threat of ‘Day Zero’ – the day when the munici­pal taps run dry – has spurred domestic and commercial water users into action. But while the Mother City’s situation has filled news reports, upcountry businesses should also be assessing their water risks.

‘KwaZulu-Natal and Gauteng went through a similar very dry period earlier in 2017 and managed to fill up their dams and rivers when almost an instant rainfall occurred,’ says Kevin Winter, a sustainability scientist and theme leader at the University of Cape Town’s Future Water Institute. ‘They were lucky, because it’s virtually a matter of climate change and global warming – a combination of critical factors that one cannot control.’

Willem de Lange, environmental and resource economist at the CSIR, says: ‘It’s starting to dawn on South Africans that water is an important resource and that bad things happen when it becomes unavailable.

‘I’m not sure whether they realise that water itself is free – it’s the services and the effort to make it available that cost money, because it’s increasingly expensive to clean, filter, chlorinate and pressurise drinking-quality water and pump it to where it’s needed.’

So while water in itself has no value, it becomes valuable by its contribution to human well-being (its ‘utility value’), De Lange explains. ‘This is a derived value, unlike for example a diamond that mostly only has inherent value.

‘Water is a primary input in all economic activities, and whatever the water is used for determines the value of the resource. It would however be wrong to argue that the value of water is equal to the value of all economic activity, because many other inputs also contribute to the economy,’ he says.

‘It’s like asking for the value of baking powder when baking a cake. Is it equal to the direct cost of the baking powder, which is minute? Or is it equal to the value of the cake itself, which is substantial, because it will flop without baking powder?’

Seeing that water is such a critical ingredient in any economic activity, it should be considered a ‘material’ issue for all companies in sub-Saharan Africa, regardless of how much they consume, argues Michael Rea, managing partner at Integrated Reporting and Assurance Services. ‘Materiality should never be exclusively based on cost or consumption, but rather on whether the mismanagement of the resource could have a significant impact on the future sustainability of the business within the context in which they operate,’ he says.

The future of businesses has already been affected by the water crisis, according to a survey by the Cape Chamber of Commerce and Industry. In October 2017, nearly half (49%) of the surveyed businesses said the drought was threatening their survival. Twenty-three percent of firms further reported having had to postpone or halt new investments in their businesses because of the drought.

‘Without water, we close down,’ said one respondent, while others warned of the knock-on effect that cutbacks and closures would have on other firms and on employment.

Chamber president Janine Myburgh said in a media statement: ‘It’s clear that we have a major crisis on our hands, and it’s time to slash the red tape and take emergency measures. Unless we do so without delay we will suffer long-term damage to the economy and the reputation of the city.’

The City of Cape Town (CoCT) has taken drastic measures, such as escalating water restrictions to Level 6B, thereby limiting domestic users of municipal water to 50l per person per day. Commercial users are also urged to cut down their consumption, and non-compliance will be punished with hefty fines and prison sen­tences. The resilience plan includes aug­menting the water supply with the assistance of the private sector through desalination plants, water reclamation and groundwater extraction.

Arguably the most dramatic action was the announcement of Day Zero, which, according to Winter, is ‘a vital concept’ in managing the water crisis. It has served as a wake-up call for the 60% of water users who were still not complying with the restrictions, while at the same time attracting massive worldwide attention and headlines.

‘Will Cape Town be the first city to run out of water?’ asked the BBC, which went on to list other major cities facing similar shortages of drinking water (notably São Paulo in Brazil, Bangalore in India, Beijing in China, but also London and Miami). Closer to home, Port Elizabeth and several rural areas in the Eastern Cape are also severely affected by drought currently, with critically low dam levels. Their position is, however, attracting far less publicity.

The CoCT has been proactive and issued water guidelines for commercial users that include a ‘smart office audit sheet’. To start off, companies are told to conduct regular water audits to determine which business areas are using the most water and to measure the effect of water-saving efforts.

The city’s ‘Think Water’ initiative – in partnership with the Green Building Council of South Africa (GBCSA) and the South African Property Owners’ Association – has started putting up signs in city office buildings to inform the occupants how many litres of water are being used per person on any particular day – and that this amount forms part of their personal daily allowance of 50l.

‘Achieving meaningful water savings at any building that you own but others use isn’t easy,’ says Werner van Antwerpen, head of sustainability at Growthpoint Properties. He explains that the group has conducted detailed water audits of its office buildings to gauge their water efficiency and improve it. Office buildings are benchmarked against the GBCSA energy and water performance tool, which is sponsored by Growthpoint and Eskom.

The group is also investing in smart water meters. ‘Smart meters have proven to reduce the amount of water lost substantially, because consumption data is measured every 15 minutes,’ says Van Antwerpen. ‘This allows facilities management teams to respond to leaks within hours, instead of weeks.’

In September 2017, Growthpoint stated that it was recycling grey water from the municipal supply at its Bayside Mall, which as a result had reduced its municipal drinking water consumption by 3 million litres each month. In addition, the group is trying out technology to turn air humidity into water at its Sandton head office. And at the V&A Waterfront, which it co-owns with the Public Investment Corporation, the firm is involved in building a desalination plant.

All these actions are included in the city’s guidelines, which further promotes the installation of water-efficient, low-flow taps or aerators, water-saving shower heads and toilets as well as the replacement of automatically flushing urinals. As far as landscaping is concerned, property owners are advised to choose water-wise plant species, limit lawn areas and mulch flowerbeds to help retain moisture in the soil.

While Growthpoint says it has stopped all irrigation and water features to save the resource, director of Rabie Property Group, Miguel Rodrigues, warns: ‘Resale property values will be affected in developments that are not able to maintain their landscaped areas and recreational facilities.

‘We are currently revisiting all our landscaping to ensure the use of indigenous and water-wise plants and ingenious designs.’ He adds that the company is ‘investigating taking all our future commercial buildings completely off the water grid via employing various methods such as the use of recycled water and treated effluent, rainwater harvesting and the like’.

An estimated 80% of the total water consumed in the group’s recently opened Century City Square mixed-used development (which incorporates a hotel, restaurant and conference centre, 15 000 m2 of office space and 51 apartments) is already being recycled. According to Rodrigues, buyers in the residential market will in future select developments with access to alternative water supplies.

While many companies are working long term on augmenting their private water supplies, for some the immediate answer to the crisis is short term – hiring chemical toilets, stockpiling bottled water and, in anticipation of Day Zero, drawing up emergency rosters for staff to queue for water.

‘When a system enters into crisis mode, the planning horizon decreases and the bigger picture gets lost,’ says De Lange. ‘South Africa’s bulk water supply is limited, so we have to get used to the fact that we live in a dry country and that our long-term climate model is changing. We need to think strategically and plan ahead for an even drier and warmer future.’

He adds that we can learn from other water-stressed countries. For instance, Namibia has kept its water consumption low, with Windhoek becoming a case study in treating sewage water into drinking quality. Israel, Australia, California and Oman provide examples of successful dual reticulation – where two separate pipe systems deliver water, one with potable water for human consumption and the other one with grey water for flushing toilets, irrigation and other outdoor uses.

‘In particular, we have to stop the flushing of drinking water down the toilets,’ says Rodrigues, who explains that Rabie’s new residential buildings are being designed with dual plumbing systems that use non-potable water for the toilets. This ‘fit for purpose’ concept is already common in other sectors, such as agriculture, mining and power generation. In the past, most water was treated to drinking standard, but it makes more sense to use only the lowest possible water quality that is required for each specific use. This keeps costs down and frees up high-quality water for human consumption, according to De Lange.

The state of affairs facing Cape Town has crystallised the situation but it is apparent that SA has been living beyond its water means for some time. Behaviour concerning use of the resource needs to change – quickly.

The possibility of a city running out of water is a scary thought. But if tackled correctly, the country’s dry circumstances could evolve into a catalyst for a more sustainable future.

By Silke Colquhoun
Images: Gallo/Getty Images, Sean Dollery/HMimages

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