There won’t be a Day Zero: Top economist

The eyes of the World are now on Cape Town waiting to see whether the taps will be turned off and residents will have to queue for water.   The Cape Messenger’s John Fraser spoke to cynical optimist, economist Russell Lamberti:

JF: Capetonians are being bombarded with advice on everything from running their schools and hospitals to performing their ablutions in a bucket. But you seem to think the dreaded Day Zero will never arrive.

RL: As it currently stands, “Day Zero” will be avoided. Farmers are being held to their 58 billion litre allocation for the year and that is decisive.

There is at least 110 billion available litres in the big six dams (allowing for evaporation and a supposedly ‘unusable’ last 10%), and total use by in Cape Town Metro, smaller municipalities and farmers is currently falling to about 600 million litres per day as the farmers are throttled to almost zero.

This leaves about 180 days of supply, taking us well into the winter rainfall period.

Asking for further urban demand cuts at this point is in my opinion unnecessary but from the City’s perspective they are trying to be as conservative (literally) as possible.

Expect to see the now mythical Day Zero postponed into June and then July, by which time the winter rains would have arrived. Even winter rains as poor as 2017 won’t be a problem.

No winter rain at all, of course, will be another matter altogether.

With negligible winter rainfall (extremely improbable), Day Zero could conceivably happen. But in such a scenario, no amount of urban water saving would really help at this stage except to delay catastrophe by a few weeks. Bottom line: It’s all about the farmers sticking to their allocation at this point.

JF: You seem to suggest there has been some sensational reporting of the water crisis. Who would gain from that?

RL: Well I think hardly any reporting has been data-driven but instead polemical and emotional. It’s a lot easier to slap a picture of a drying Theewaterskloof dam on your story and blather on about some warning from 10 years ago that wasn’t heeded and how it spells imminent doom, than actually digging into the hard data and plainly laying out the reality of the situation.

How often have you read a piece on the Cape Town water crisis that lays out in clear and simple terms how much water is left, how much we’re using, how much we’ll use by winter if the urban and agricultural allocations are adhered to, and how many days of remaining water supply this implies?

How often have you read about the fact that Elgin valley had a massive water surplus that’s been fed into the Steenbras dams all summer long? How often have you heard about the 100 billion litre private farm dam capacity in the Boland? Who’s reporting on whether the farming allocation is being enforced, and how?

Frustrated at this lack of data reporting, I dug around for myself and concluded at the start of November 2017 that Day Zero would be avoided. The media, to put it bluntly, has been woeful in reporting the numbers that really matter.

Thank goodness for The Cape Messenger in this barren media landscape!

JF: If we can keep the taps running until the next proper rains start recharging the dams, in other words avoid Day Zero, what lessons will have been learned?

RL: I fear very little will have been learned. I hope I am wrong.

The wrong lesson would be that we must now live on severe water rations for years on end, or that central planning politicians know how to manage water supply.

The right lesson would be to move immediately to market-based water pricing and private supply provision.

I really hope we don’t buy into this lie of the “new normal” – that water is so scarce in Cape Town that we have to live a life of water skimping; that climate conditions relegate us to a life of water lack.

We need to adopt an abundance mindset. There is plenty of water in the Cape. There is sea, rivers, dams, and aquifers. There is rainfall.

The reason we have nearly fallen into calamity is because of ludicrously cheap water prices and state monopoly water provision. The result? Long-term overuse and undersupply.

A drought was merely the little child that showed us the emperor has no clothes. It is vital that we ditch water socialism and embrace a free market in water, but I am pessimistic that our political leaders have the vision to move decisively in this direction.

JF: If property prices start to fall in CT, would you step in and invest?

RL: Any fall in Cape Town property prices resulting from a fear of Day Zero would, all else equal, be a good buying opportunity indeed. I like Cape Town property as a long-term bet, but the market has gotten very expensive and a cool-off period may be warranted, regardless of the water crisis.

JF: What do you make of all of the political back-biting?

RL: I think it is par for the course when partisan politics meets a crisis made by politicians. Fixing water supply and delivering it to consumers should be in the entrepreneurial realm, not the political realm.

Since entrepreneurs must play by the rules of free and fair competition, they tend to let their product do the talking. Politicians tend to play by the rules of diktat, winner-takes-all, and tax-funded careerism, so instead of water shortages being solved in an adult fashion, we see a rather dramatic fiasco.

This is not to have a go at any individual politician. On the contrary, it is a natural function of a bad system. The politicians are perhaps rather unwitting actors in this socialist tragedy that really goes back many decades to ill-conceived national water policy.

JF: There seems little doubt that a serious investment in new water infrastructure is required in CT, in wastewater recovery and treatment, desalination and so on…. What roles should the public and the private sectors play in this?

RL: Ideally the only role I would see for the public sector is to uphold basic laws and property rights and sanction abuse and fraud in the marketplace, and even then only when those problems can’t be well resolved by private intermediation and conflict resolution.

The rest can be done by private firms with private capital.

If there is an insistence on giving low-income households free basic water, then government can provide water vouchers to certain households to purchase water on the free market at market prices up to a basic level, after which households can pay out of pocket.

JF: Agriculture is clearly very important to the Western Cape. Does it worry you that the drought will hit production and employment?

RL: I feel tremendously for the farmers. They have been let down by water socialism like everyone else.

The difference is their businesses depend crucially on water.

Many farms are in a desperate state. On average it looks to me as though Boland farmers will only meet about 50% of their usual irrigation needs this year.

However, farmers have been paying too little for irrigation water for far too long. Irrigation methods don’t advance much in SA because there is little price incentive to do so. Cheap raw irrigation water means overuse and eventual shortages.

Some farming areas have been well supplied with water due to favourable local conditions, as in Elgin valley. Also, farmers have varying degrees of private water supplies to help them along and various insurance products to cushion the blow. Staff overheads can be cut and less seasonal labour used.

So overall I think farming output will suffer but farms will bounce back with perhaps some consolidation in the sector as larger players use conditions to swoop in on distressed assets. Prolonged drought in 2018 and 2019 would only accelerate this consolidation trend.

JF: Finally, do you think the water crisis strengthens the case to move Parliament from CT to Pretoria?

RL: I don’t think it has any effect on that decision but I do hope parliament moves to Pretoria regardless – Cape Town has enough criminals as it is without hundreds of MPs roaming the streets!

In all seriousness, I think it would be very healthy for the long term future of Cape Town and the Western Cape to become less, not more attached to national government and I think parliament moving away would be a powerful symbol of greater Cape independence and self-governance.

This by the way is my wish for all regions in South Africa. For more power to be devolved to provinces and municipalities, and even wards, suburbs and streets, away from the bloated, sclerotic, dysfunctional central state.

1 Comment on "There won’t be a Day Zero: Top economist"

  1. Wow, the more I read about Russell Lamberti and his views, the more I think he is my kind of guy.

    I just worry that certainty of defeating Day Zero is counterproductive at the moment for Cape Town. There are so many people just looking for an excuse to use more water than they should. It took so long for many to get it right, maybe fear is what they need right now. Hell, I have to look at my green pool every day and fight the urge not to fill it again.

    Uncertainty is a greater force in producing the desired results — in this case — than certain failure or certain victory. What Russell has said is sensible information and great to recline upon in the midst of our 50 liters a day, but I think it would be dangerous in the hands of “the masses”.

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