Windhoek
A water shortage in Windhoek, which is the the central and most significant business hub in the country, from which most business activities and income originate, is likely to have a significant impact on all businesses, and not only water-dependent industries.
This is according to a recent study conducted by Simonis Storm Securities, who warned that a water shortage or restriction in the region will have spillover effects and affect economic activity across the country, placing Namibia’s strong gross domestic product (GDP) growth rate in jeopardy.
“In a water shortage scenario, supply preference will be given to households as water is required to sustain life. Public and essential services such as schools, hospitals, government, police and army will be second in line, while business, industry and construction will come last,” states the report, which was compiled by James Cumming
the director of research, and trainee analysts Andre Kuschke and Indileni Nanghonga.
The report further states that any drought has an enormous impact on the agricultural sector, and even though this sector only contributes 7.4 percent towards GDP, it is extremely important to the country as about 70 percent of the population depends on agricultural activities for their livelihood, while 29 percent of all employees are employed within this sector.
Businesses that depend on the farming sector like Agra, Meatco, Namibia Dairies, Namib Mills and other companies are likely to suffer too, warned Simonis Storm.
“Although not yet a problem, this does have wider implications for the government’s poverty eradication and industrialisation vision – industrialisation needs water and plenty of it in order to develop. So hopefully the government will not sit idly at the sidelines, but will rather take proactive steps to develop infrastructure to ensure sufficient water can be supplied where it is needed. Investors (foreign and local) will be wary of investing where the threat of water, as well as electricity, shortages are not managed properly by the authorities and utilities.”
Companies that will potentially be affected by water shortages include Namibia Poultry Industries (NPI), which requires about six litres of water to rear a chicken, and another 12 litres of water per chicken processed in the abattoir.
At a production rate of 250 000 chickens per week, the entire operation requires approximately 240 000 m3 of fresh water per year (or 240 million litres) to function.
The company is in the process of investing N$5 million to N$6 million in a reverse osmosis plant to recover 80 percent of the water used in the abattoir, which should reduce its water demand for fresh water from NamWater by 50 percent.
Namibia Dairies will also be affected, where about 80 percent of water usage is for the production of fruit juices from concentrate, while the rest is used in the production process of milk products, such as the generation of steam for making UHT milk and to clean equipment.
The company is currently looking at various contingency plans, but is also concentrating on using water sparingly. Should water supply be interrupted for an extended period, then the dairy is likely to suffer milk losses due to a halt in production and milk going off.
Meanwhile, Namibia Breweries (NB) recently announced it will acquire 25 percent in the issued share capital of Sedibeng Breweries. This is in part to lessen the burden on the water demand that the breweries has on the Windhoek area.
Namibia Breweries is the biggest industrial consumer of water in Windhoek. Recent plans to lessen the demand on the City of Windhoek include the activation of two new boreholes and the rehabilitation of an existing borehole.
In 2014, Namibia Breweries reported that they used on average four litres of water to produce each final product. According Simonis Storm, Namibia Breweries produced about 1.6 million litres of beer in Namibia, which boils down to about 3.2 million units sold for the year. Although the four litres includes recycled water, Simonis Storm cautioned that if water restrictions are implemented Namibia Breweries will feel the impact as they are heavily reliant on water supply.
Also to be affected are Meatco and the Okapuka feedlot. The feedlot at Okapuka currently holds about 9 000 cattle on a daily basis and each animal drinks about 50 litres of water a day, which equates to 450 000 litres or 450 m3 of water per day. The total capacity of the feedlot is about 11 000.
“In the case of water shortages, the number of cattle held in the feedlot will have to be reduced to match the water supply, or in a worse case shut down completely. This will then have a knock-on effect on the Meatco abattoir, which is reliant on a steady supply of slaughter animals from Okapuka. The Meatco abattoir (or any other abattoir) uses a lot of water for washing to maintain hygienic standards. A restriction of water supply will reduce the amount of meat through-put and hence profits. Meatco does have the option of redirecting slaughter animals to its abattoirs in other locations, which could partially offset lost production at its Windhoek abattoir,” warned Simonis Storm.
The report says that the biggest users of water in the central region is government and business. “One can safely assume that the water intensive manufacturers are using water efficiently in their operations with minimal wastage. Any significant additional water saving will have to come from introducing a water recycling plant or different manufacturing processes, or even moving location to an area where there is sufficient water security. But these are all long-term initiatives and can involve large capital investments.”
In the short term, said Simonis Storm, manufacturers could reduce production until water supply is restored, but this would lead to loss of revenue and laying off of staff. The brokerage noted that Namibia Breweries and Coca-Cola are the obvious industries to be affected.
“In an extreme case, if NPI was to cut back chicken production, it is not impossible to think that this would lead to a severe shortage of chicken meat in the country and a rise in retail prices for poultry,” says the report.