The water crisis confronting South Africa is the country\u2019s new Eskom\u201a according to Nomura global markets research analyst Peter Attard Montalto.<\/p>\n
He said the water situation in South Africa has been a crisis waiting to happen for a long time – but seemingly always in the future with a difficult-to-see trigger.<\/p>\n
\u201cThe El Ni\u00f1o event that hit South Africa in March and may have another six months at least to go has been the trigger that has exposed structural weaknesses on water security. In this sense\u201a it\u2019s like Eskom 2008 \u2014 a crisis waiting to happen and a random event (wet coal) that pushed the system over the edge\u201a\u201d Attard Montalto said in a research document.<\/p>\n
Though parallels are clear\u201a the water crisis is however more complex\u201a he said.<\/p>\n
\u201cAs with Eskom\u201a the water crisis is not so much about a system that is at every moment in crisis or deficit but about a system that has structural defects that are exposed by weather and \u2018unlucky\u2019 events such as technical problems. At present\u201a that has meant a lack of rainfall and record-low levels in dams\u201a combined with high temperatures in some areas\u201a\u201d he pointed out.<\/p>\n
He also pointed out in an aside that it is worth noting that South Africa actually has some of the highest piped water quality in the world where the system is working.<\/p>\n
He added that the serious drought developing in South Africa\u201a especially in the north and east highlights much deeper structural issues on water supply.<\/p>\n
\u201cFood prices are a key fear factor for the SARB (SA Reserve Bank)\u201a driven by weather and water-related problems. These issues appear set to intensify until the middle of next year\u201a and while seasonal factors can wear off\u201a long-term structural issues remain with water security.<\/p>\n
\u201cMarkets should care\u201a because of the inflation risks and monetary policy implications\u201a as well as the impact of water restrictions on output. We lower our 2016 GDP growth forecast to 1.6% from 1.9%\u201a”\u00a0 Attard Montalto said.<\/p>\n