Assessing The Macroeconomic Effects Of Water Scarcity In South Africa Using A Water-CGE Model

Abstract We develop a dynamic computable general equilibrium (CGE) model to assess the macroeconomic impacts of water scarcity and water (in)security in South Africa. The water-CGE model which includes a detailed representation of water flows (surface water, groundwater, wastewater, and seawater) has been calibrated with an updated social accounting matrix enabling to conduct policy simulations up to 2030. We show that water scarcity will have an impact on the South African economy. With an increase of water scarcity by 17%, the CGE model predicts a decrease of South African GDP by -0.34% in 2030. The long-term impact of water scarcity varies from one sector to another, with the most negatively impacted sectors being those related to water (loss of GDP up to -2.48%). Due to the increase of water scarcity, the unemployment rate is expected to be 0.1% higher in 2020 which represents a loss of 18,000 jobs compared to the baseline year (2013). The 17% increase in water scarcity is also expected to have a negative impact on household welfare: by 2030, household consumption may decrease by -0.26%. Some policies can mitigate the negative impacts of water scarcity, the most promising one being to promote water saving.