Ridolfc
Expert Member
While South Africans are reluctantly coming to terms with the reality that load-shedding is here to stay for several years to come, the full knock-on impacts of this reality, both economic and practical, are not yet fully understood. This week it emerged that inconsistent power supply threatens the already beleaguered South African water infrastructure, with water shortages in urban centres possible as soon as this summer.
According to government officials, about a third of all towns are in some form of serious water distress, the Mail and Guardian reports, with one in 10 municipal water systems considered to be totally dysfunctional.
In the face of inconsistent power supply, water engineers are working to to manage shortages. Electricity outages at pumps that distribute raw water could leave treatment stations without water, leaving no clean water for the distribution pumps to move once electricity returns.
According to the 2015 World Economic Forum Global Risks Report, water crises this year rank as the number one global risk in terms of impact, coming in above nuclear weapons or global disease pandemic, emphasising the severity of the situation.
“The implications of shortages of water are as severe as the shortage of electricity as these are basic services that are essential for the operation of most businesses. Shortages and interruptions place businesses at risk as they are not able to function normally and within the normal framework of operations,” head of corporate affairs at Santam, Donald Kau, tells RISKSA.
“Water shortages are likely to be treated as an additional cost for business: having to make alternative arrangements for water supply will have a cost implication which will ultimately be passed onto the customer,” he continues.
Food and beverages giant, Nestlé, has already felt the impact at its Harrismith, Free State factory, which experience a reported 40 interruptions to water and electricity supply in the second half of 2014, costing the company R100 million due to interruptions.
“Industries that use water in their manufacturing processes or that need water to operate safely are especially at risk. However, there are also difficulties for businesses in offices and retail environments and in these cases alternative arrangements have to be made.
Ultimately this will impact businesses large and small and impact on economic growth,” says Kau.
More severe than expected
Though Eskom’s woes are not brand new, the true severity of the situation was not fully revealed until December last year.
“The impact is now upon us, but it is not yet fully understood, and it was not fully anticipated before Eskom came clean on exactly what their situation is and what that looks like in the medium term,” notes Geoffrey Leathem, CEO of reinsurance intermediaries, Guy Carpenter and Company. “We run the risk of a series of claims from insureds. How policies respond and how that then aggregates into reinsurance claims could be a significant loss driver, requiring remediation in the market.”
How can business respond?
Depending on their level of dependency on water, the impact for businesses and the level of risk they face will vary, but, ays Kau, all commercial entities need to re-look at their business recovery processes as well as re-assess their risk situation.
“Businesses that use water for manufacturing or construction will be heavily impacted if this becomes a regular problem. Water shortages place a wide variety of operations and enterprises at risk such as hospitals and offices too,” he explains.
“Business interruption cover is an essential provision for all businesses and can insure against the loss of profits or revenue, rental during downtime and additional costs incurred in minimising the loss of revenue. Likewise business owners can take out cover to protect machinery against fire and water damage. If machinery breaks down, emergency repairs can be covered.”
http://www.risksa.com/could-eskom-turn-off-sas-taps/
According to government officials, about a third of all towns are in some form of serious water distress, the Mail and Guardian reports, with one in 10 municipal water systems considered to be totally dysfunctional.
In the face of inconsistent power supply, water engineers are working to to manage shortages. Electricity outages at pumps that distribute raw water could leave treatment stations without water, leaving no clean water for the distribution pumps to move once electricity returns.
According to the 2015 World Economic Forum Global Risks Report, water crises this year rank as the number one global risk in terms of impact, coming in above nuclear weapons or global disease pandemic, emphasising the severity of the situation.
“The implications of shortages of water are as severe as the shortage of electricity as these are basic services that are essential for the operation of most businesses. Shortages and interruptions place businesses at risk as they are not able to function normally and within the normal framework of operations,” head of corporate affairs at Santam, Donald Kau, tells RISKSA.
“Water shortages are likely to be treated as an additional cost for business: having to make alternative arrangements for water supply will have a cost implication which will ultimately be passed onto the customer,” he continues.
Food and beverages giant, Nestlé, has already felt the impact at its Harrismith, Free State factory, which experience a reported 40 interruptions to water and electricity supply in the second half of 2014, costing the company R100 million due to interruptions.
“Industries that use water in their manufacturing processes or that need water to operate safely are especially at risk. However, there are also difficulties for businesses in offices and retail environments and in these cases alternative arrangements have to be made.
Ultimately this will impact businesses large and small and impact on economic growth,” says Kau.
More severe than expected
Though Eskom’s woes are not brand new, the true severity of the situation was not fully revealed until December last year.
“The impact is now upon us, but it is not yet fully understood, and it was not fully anticipated before Eskom came clean on exactly what their situation is and what that looks like in the medium term,” notes Geoffrey Leathem, CEO of reinsurance intermediaries, Guy Carpenter and Company. “We run the risk of a series of claims from insureds. How policies respond and how that then aggregates into reinsurance claims could be a significant loss driver, requiring remediation in the market.”
How can business respond?
Depending on their level of dependency on water, the impact for businesses and the level of risk they face will vary, but, ays Kau, all commercial entities need to re-look at their business recovery processes as well as re-assess their risk situation.
“Businesses that use water for manufacturing or construction will be heavily impacted if this becomes a regular problem. Water shortages place a wide variety of operations and enterprises at risk such as hospitals and offices too,” he explains.
“Business interruption cover is an essential provision for all businesses and can insure against the loss of profits or revenue, rental during downtime and additional costs incurred in minimising the loss of revenue. Likewise business owners can take out cover to protect machinery against fire and water damage. If machinery breaks down, emergency repairs can be covered.”
http://www.risksa.com/could-eskom-turn-off-sas-taps/
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