Wednesday, February 28, 2018

Cape Town Water Crisis

Cape Town Water Crisis - Kat Van Hulle

South Africa’s second largest city, Cape Town, has been caught up in an ongoing water drought for the last three years. Cape Town is now fast approaching “Day Zero”, the estimated date when the city is due to run out of water completely. Day Zero was initially declared as April 16, 2018 but has recently been pushed back to July 9. Nonetheless, citizens of the region are now more than ever feeling the impending stress of what will happen once Day Zero arrives. If Cape Town’s water consumption problem doesn’t lessen within the next few crucial months, South Africa will be facing economic implications in both the short run and long run for decades to come.

As of now, Cape Town’s nearly 4 million inhabitants have been restricted to 50 liters of water per day. In comparison, per capita water use per day in the United States averages around 101.5 gallons, approximately 385 liters. Once Day Zero hits though, South Africans will be allowed only 25 liters each day, and be forced to collect the water at one of the 200 public distribution locations since all taps will be turned off. With extremely limited access to water, how will the city of Cape Town be affected, specifically their previously booming property and tourist market?

Consumer expectations about the state of Cape Town has shifted as citizens begin to brace themselves for the severity of Day Zero. While one may think that the drought leave residencies abandoned and tons of buildings up for sale, Cape Town’s property market will actually experience an increase in demand. Since the outlying rural and agricultural areas of Cape Town will be hit hardest by a lack of water, an influx of these workers will be looking for affordable housing rentals in town, subsequently pushing up price levels on the limited supply. As nominal wages drop, workers will seek job opportunities in other places, and need cheaper residency. Once wages fall, individuals’ marginal propensity to consume decreases and their marginal propensity to save increases. Far fewer developments will be built, further exacerbating the minimal supply of property for unemployed farmers and driving up the price level which could be an issue in the short run.

In addition to the housing market, revenue generated by tourism that would have significantly boosted the country’s GDP will likely be stifled by the water crisis too. The picturesque beaches and grand mountain views are what draw tourists to Cape Town, and the industry has adjusted to accommodate foreign travelers by building hundreds of hotels and resorts. City officials are questioning whether tourists should be allowed in at this time, or if they should try to save the travel industry that contributes about 10% of South Africa’s annual GDP. In some areas, “B&Bs and hotels have now been given an extra dispensation to use municipal water in a bid to keep the tourist industry alive, but all guests are asked to be as careful as possible” (Twigg). In my opinion, the resource market needs to be addressed first before Cape Town starts to worry about tourism. The water and resultant agricultural problems should be the main priority to ensure the longevity of the city before civilians start to flee and tourists won’t be interested in complying with water restrictions.

*Click here for interactive graphs/charts illustrating the Cape Town water crisis

Lee, Tracy. “What is 'Day Zero'? Cape Town set to become first major city to run out of water.” Newsweek, 29 Jan. 2018,

Scott, Michon. “Day Zero Approaches in Cape Town.” NOAA Climate.Gov, 7 Feb. 2018,

Twigg in Cape Town, Melissa. “Cape Town drought: How locals and tourists are being affected.” The Independent, Independent Digital News and Media, 30 Jan. 2018,


  1. Many times in econ, we begin to wonder why it matters how hypothetical scenarios affect hypothetical business and markets; we forget the real world application of these topics and how important they can be to peoples' lives. As shown in your example, econ reaches much farther than how people spend their money--econ can mean life or death.

  2. I also agree that the resource market needs to be addressed first before Cape Town starts to worry about tourism because water is something that everyone needs. It's crazy to me that such a beautiful town, that has plenty of tourism is struggling to have enough water for everyone. Considering Cape town's annual revenue from tourism and how much it affects their GDP, South Africa needs to solve their water crisis soon.

  3. This is a perfect example of how environmental issues connect with economic issues. It is important for economists and the government to be aware of other influencing factors that can dramatically effect the economy, even if it is not evident at first.

  4. Great article -- I think you clearly highlighted the effects of the drought on the country's economy. I was curious about whether South Africa will receive foreign aid, and whether the government will attempt to increase consumer spending in areas other than tourism.

  5. This is a very scary topic to think about. I think here in America we don’t realize how lucky we are to have things like water easily available to us. We recently talked about Cape Town in APES during our water conservation unit, so it’s interesting that you wrote an article about it. This makes me wonder what would happen if America faced a problem like this. In APES we are learning that America is using it’s water unsustainably and we will eventually (unless there is a change in how much water we consume) run out of clean freshwater. However we are lucky as we have a lot of money we can spend to solve a problem like that, whereas Cape Town may not.

  6. This is a significant issue that certainly has a large impact on the economy. As you said, citizen's marginal propensity to save is increasing due to the crisis. I wonder if in addition to money, they are beginning to stock up on water as well? It would make sense that many people are holding large jugs of water in their homes in order to have more to consume in the future. In this way, they would be holding "inventories" like firms often do, but this would only contribute to the water scarcity by taking away from everyone's current water consumption.

  7. This was extremely interesting to read as I didn't even know that this serious drought in Cape Town was occurring! The fact that residents of the town only can use 50 liters of water a day and will be reduced to 25 once Day Zero hits is something that people should not have to deal with. Here in America the majority of us do not have to deal with the scarcity of water and how much we consume. If we did, I agree that that would change consumer expectations as you mentioned, especially if there would be a date in which water would run out. Overall this was an extremely interesting topic and article. Great job!


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