Is Water Supply Now a Bigger Risk Than Energy for Businesses in sub-Saharan Africa?

Introduction and Framing

Sub-Saharan Africa faces mounting resource constraints that pose strategic risks to businesses, especially in manufacturing and agribusiness. In recent years, resource security has moved from a peripheral concern to a boardroom priority amid climate change, infrastructure gaps, and rapid economic growth. Nearly two out of five Africans (about 600 million people) still live without access to electricity, highlighting the region’s chronic energy deficit. At the same time, water underpins livelihoods and commerce to an extraordinary degree: an estimated 62% of jobs in sub-Saharan Africa depend on water availability, far above the global average. When rains fail and drought strikes, economic output and employment quickly suffer, underscoring that water is not just a humanitarian concern but a business continuity issue. In this context, companies are asking whether water supply has overtaken energy supply as the greater operational and strategic risk in the region. This article explores that question, examining the risk landscape for energy and water, how they compare, and what it means for manufacturing and agribusiness in particular.

Energy Risk Context in sub-Saharan Africa

For decades, unreliable electricity has been a top concern for businesses in sub-Saharan Africa. The region’s power infrastructure struggles to keep up with demand, leading to frequent blackouts, voltage fluctuations, and expensive self-generation. On average, African manufacturing enterprises experience power outages on 50+ hours per month. World Bank enterprise surveys indicate about 78% of firms in Africa suffered outages in a given year, and 41% of firms identified electricity unreliability as a major constraint on operations – the highest share of any region globally. The economic costs are enormous: firms lose around 5% of annual sales on average due to power interruptions, with losses as high as 15-20% in some countries without widespread backup generation. In Nigeria, for example, businesses collectively lose an estimated US$29 billion each year from power outages and unreliable supply.

The drivers of this energy risk are well documented. Many national grids have insufficient generation capacity and aging transmission infrastructure, causing chronic supply gaps. Even where capacity exists, fuel supply issues and maintenance problems lead to load-shedding in countries like South Africa, Zimbabwe, and Nigeria. Manufacturers and agri-processors have historically coped by investing in diesel generators to keep the lights on. However, backup generation is expensive and inefficient: diesel-generated electricity in Africa costs an estimated $0.40–$0.50 per kWh, several times higher than grid tariffs. This erodes profit margins, as seen in countries like Ghana and Kenya where firms spend large shares of operating costs on fuel for generators. Moreover, reliance on diesel exposes companies to volatile global oil prices. High energy costs and inconsistent supply have constrained industrial productivity and competitiveness.

Rural-based agribusinesses face a slightly different energy challenge: many farms and processing sites are simply off-grid due to low electrification rates (only 43% of sub-Saharan Africans had electricity access as of 2022). These enterprises often depend on diesel pumps for irrigation and generators for running mills or cold storage, which raises costs and limits scalability. In short, energy risk in sub-Saharan Africa has traditionally been about lack of reliable, affordable power – causing everything from production downtime to equipment damage and forcing firms into costly coping strategies. For these reasons, power supply stability has long dominated business risk agendas in the region.

Water Risk Context in sub-Saharan Africa

Water security is a newer addition to many companies’ risk registers, but it is rising fast up the agenda. Sub-Saharan Africa’s water risks stem from a confluence of physical scarcity, climate variability, competition for resources, and weak infrastructure/governance. Unlike energy (which can be imported or generated in alternative ways), water has no substitute in most industrial and agricultural processes – making its reliable supply mission-critical for businesses.

The region experiences highly uneven water availability. Many areas enjoy abundant rainfall and large river basins, yet others endure chronic water stress. Overall, sub-Saharan Africa withdraws less water per capita than other regions, but climate change and population growth are rapidly altering the balance of supply and demand. Water demand in sub-Saharan Africa is projected to increase by 163% by 2050, four times the rate of increase expected in Latin America. This surge is driven by agricultural expansion, urbanisation, and industrial growth. On the supply side, climate change is introducing more extreme rainfall patterns – prolonged droughts on one hand and intense floods on the other. Both are damaging. Droughts deplete rivers and aquifers, triggering water shortages for farms and factories; floods can inundate treatment facilities and contaminate sources, disrupting water delivery to industrial sites.

Current data already reveal strains. According to the World Meteorological Organization, around 250 million people in Africa experience high water stress conditions, and four out of five African countries are unlikely to have sustainably managed water resources by 2030. In sub-Saharan Africa, much of the water risk comes from variability: most agriculture is rain-fed, so erratic rains directly translate to volatile outputs. A stark example is the 1999–2000 drought in Kenya, which caused an estimated 16% drop in GDP as crops failed and hydropower generation fell. Similarly, recent repeated droughts in the Horn of Africa have left over 50 million people acutely food insecure and devastated livestock herds, illustrating how water scarcity can cripple agrarian economies.

Beyond physical scarcity, infrastructure and governance gaps exacerbate water risk. Storage capacity in dams and reservoirs is limited, meaning much rainfall simply runs off. Water distribution networks are underdeveloped and often poorly maintained, leading to losses and unreliable urban water service. Many manufacturers in African cities cannot count on municipal water 24/7 and must invest in boreholes, tanks, and filtration systems. Meanwhile, competition for water between sectors – agriculture, industry, and domestic use – is intensifying. Governments are increasingly pressured to allocate water to essential public needs, which in a drought can mean cutting supply to farms or factories. Weak regulatory oversight also plays a role: in some cases, unrestricted groundwater pumping by farms or mines lowers water tables, eventually threatening all users. Where regulations do exist (such as permitting for water abstraction or wastewater discharge), enforcement is often lax, leading to overuse and pollution that heighten long-term risks for businesses that depend on clean water.

Crucially, the dependency of key industries on water is profound. Agriculture accounts for about 80% of freshwater withdrawals in Africa, mainly for irrigation. Crop and livestock production thus hinge on adequate water through either rainfall or irrigation systems. Manufacturing also relies on water for everything from processing raw materials to cooling machinery and cleaning products. A beverage plant, for instance, cannot operate without consistent water input and often requires high-quality (filtered) water for its product. Textiles, food processing, brewing, pulp and paper, mining and minerals processing – all are water-intensive. For these sectors, water risk manifests in operational interruptions (when water is rationed or sources dry up), higher costs (securing alternative water or treating lower-quality water), and even existential threats to business viability in a given location.

Comparative Analysis: Water vs. Energy as Business Risks

When comparing water and energy risks, it becomes clear that they have different profiles across several dimensions:

• Physical Risk to Operations: Both water and energy shortages can halt production, but the nature of disruption differs. Power outages typically cause immediate, short-term shutdowns – machinery stops, lights go out – until generators kick in or the grid is restored. The impact is often acute but temporary. In contrast, water scarcity tends to develop more gradually but can lead to prolonged or even indefinite operational constraints. A factory might manage a one-day power cut by running a diesel generator, but if the local river runs dry or a drought empties reservoirs, there is no quick fix to obtain water. Water shortages can force production cuts for weeks or months, and in severe cases have led to facility closures or relocations. For example, during a major drought in Namibia, Coca-Cola had to halt all canned drink production in-country and import products from abroad because the local water supply could no longer support the plants. Similarly, a meat processing company in Namibia temporarily closed a facility due to insufficient water for livestock and operations. These cases underscore that water risk can be deeply disruptive. Energy disruptions, while frequent, are somewhat easier to work around on a short-term basis (through generators, adjusting shifts to off-peak hours, etc.), whereas water disruptions often leave no alternative but to scale back or stop work.

• Regulatory and Policy Risk: Both resources are subject to government policies that can affect businesses. In energy, companies face risks like tariff hikes, fuel price fluctuations, and rationing (e.g. load-shedding schedules determined by utilities). Governments may also remove subsidies on electricity or fuel, suddenly raising costs for industry. For water, regulatory risks include water withdrawal limits, permit requirements for boreholes, and wastewater discharge standards. In times of scarcity, authorities might impose mandatory water use cuts – as happened in South Africa’s Western Cape during the 2018 “Day Zero” drought, where businesses were required to slash water consumption or face penalties. Companies also risk losing water licenses if allocation priorities shift (for instance, giving farmers or cities precedence during drought emergencies). Environmental regulations are another factor: manufacturers must treat effluent to avoid polluting water sources, and non-compliance can lead to fines or shutdowns. Broadly, while energy policy in many African countries has been unpredictable (e.g. sudden changes in power tariffs or fuel import rules), water policy is often less developed – but this is changing as scarcity bites. Firms now must navigate evolving water-use regulations and catchment management plans, adding a layer of uncertainty.

• Financial and Cost Risk: Unreliable power and water both increase operating costs, but in different ways. With energy, the financial hit comes from purchasing backup generators, paying for expensive diesel or petrol, and lost output during outages. Studies estimate African firms spend billions annually on self-generation; for example, Nigerian firms collectively run thousands of diesel generators, contributing to that $29 billion loss figure in productivity. High electricity tariffs (on average about $0.13/kWh in sub-Saharan Africa, versus $0.05–0.10 in other developing regions) also inflate costs. For water, financial risk emerges when companies have to invest in securing water or bear costs from scarcity. This might involve drilling deeper boreholes, buying water from external suppliers (by truck, which can be extremely costly), treating poor-quality water (installation of filtration/desalination systems), or even relocating production to water-rich areas. Agribusinesses face direct revenue loss from reduced crop yields or processing volumes in drought years – a risk that can propagate through supply chains. For instance, a beverage company reliant on local sugar or fruit will see input costs rise and volumes fall if farmers endure water shortages. Over the medium term, assets can become stranded: a factory built in what was thought to be a water-secure location may lose value if the aquifer beneath is depleted or climate shifts make water unreliable. One analysis warns that inefficient water management and climate change could reduce sub-Saharan Africa’s GDP by 6% by 2050 due to these diffuse impacts. In sum, energy issues hit the bottom line through higher operating expenses and foregone output in the short term, whereas water issues can erode profitability gradually and even undermine the viability of investments in the long term.

• Reputational and Social Risk: This is an area where water risk often outstrips energy risk. Generally, companies are not blamed for power grid failures – society tends to fault governments or utilities for energy shortages. In contrast, water usage is local and tangible, and companies (especially large agro-industrial or mining projects) can be seen as competitors with communities for a scarce shared resource. If a factory or farm is perceived to be over-abstracting water and leaving nearby villages with dry wells, the backlash can be severe. Tensions over industrial water use have led to protests and conflict in parts of Africa. For example, during drought conditions, breweries or flower farms have faced criticism for continuing to irrigate or operate while communities implemented water rationing. Companies also risk reputational damage if their operations pollute water sources – something highly sensitive under growing ESG scrutiny by investors. A notable case internationally was a beverage company’s plants in India being shut amid community protests over water depletion; similar dynamics could easily play out in African contexts as water stress deepens. Additionally, global investors and consumers are increasingly aware of water footprint and stewardship. A business seen as a poor water citizen – failing to conserve or collaborate locally – might face brand damage or lose export contracts. Energy, on the other hand, is less of a local reputational flashpoint (except perhaps the carbon footprint of using diesel generators, which is more of a climate change image issue than a local community issue).

In weighing mitigation options, energy risk has more readily attainable fixes for individual firms than water risk does. Companies can and do mitigate electricity unreliability by installing on-site generation (diesel gensets or solar panels with battery storage). The falling cost of renewables means that many manufacturers are now investing in their own solar farms or signing power purchase agreements with private producers to secure more reliable power. While these solutions are not cheap, they are increasingly common and scalable – a factory roof can be covered with solar PV, and industrial batteries can smooth short outages. In contrast, if water from the municipal supply or local river is insufficient, a business has limited options on its own. Some responses include: improving water efficiency (recycling and reusing process water, fixing leaks, using water-efficient equipment), developing alternate sources (drilling boreholes into groundwater, or in extreme cases building a small desalination plant if near the coast), and storing water on-site(rainwater harvesting or small reservoirs). However, these measures often only go so far. Groundwater may not be available or may be quickly overdrawn if many users turn to it. Rainwater harvesting is seasonal and rarely enough to supply an industrial process year-round. Desalination is technically feasible but prohibitively expensive for most single commercial users in Africa. In essence, a business can much more easily become self-sufficient in energy than self-sufficient in water. This fundamental asymmetry – you can generate power, but you cannot “generate” large volumes of fresh water – means water risk is harder to offset or insure against. Companies, therefore, must engage in broader collective action for water, as discussed below.

It is also worth noting that climate change links the two risks together: water shortages can cause energy shortages when hydroelectric dams and thermal power plants lack cooling water. In Southern Africa in 2022–2023, severe drought reduced water levels at the Kariba Dam (on the Zambia-Zimbabwe border), slashing hydropower generation and contributing to prolonged electricity blackouts in both countries. East African nations like Kenya and Tanzania, heavily dependent on hydropower, have similarly seen power rationing during drought years. Thus, a failure to manage water resources can directly translate into energy crises for businesses – a feedback loop that underlines the importance of a holistic approach.

Risk Management and Adaptation Strategies

Facing these twin challenges, businesses in sub-Saharan Africa are adopting a range of risk management strategies. For energy risk, as mentioned, the go-to solutions include on-site generation (diesel gensets, solar PV, battery storage) and efficiency improvements (to reduce dependence on grid power). Companies are striking deals such as private Power Purchase Agreements (PPAs) with independent power producers to secure dedicated supply (for example, some mines and factories in Africa have commissioned solar farms that feed them electricity under long-term contracts). These measures have seen considerable uptake and have a relatively mature market – vendors and financiers are available, and many solutions are plug-and-play (e.g. containerised solar-battery systems). While policy hurdles exist (some countries until recently did not allow self-generation or grid feed-in above certain limits), the trend is firmly toward more decentralised energy resilience for companies. The cost of renewables has dropped, making it increasingly cost-effective over the long term to generate one’s own power rather than rely solely on expensive and unreliable grids. Thus, managing energy risk is largely about technology and investment, and many African businesses are progressing along this path.

For water risk, responses are more nascent and often require collective action in addition to company-level efforts. Businesses are starting with what they can control internally: conducting water audits to identify wastage, retrofitting facilities with water-saving technologies (e.g. low-flow fixtures, dry cooling systems instead of water cooling, recycling of process water). In agriculture, techniques like precision irrigation (delivering water in the right amount at the right time, often via drip irrigation and using soil moisture data) and drought-resistant crop varieties are being adopted to squeeze more output from each drop of water. Some food and beverage firms have invested in treating their wastewater to a high standard and then reusing it for cleaning or utilities, thereby reducing freshwater intake. For instance, a brewery might treat effluent and reuse it for cleaning bottles or floors – a practice already used by major beverage groups to improve water efficiency.

However, beyond these on-site measures, companies increasingly recognise that protecting their water supply requires engaging outside the factory fence. This has led to catchment-level collaboration and water stewardship initiatives. In practical terms, this might mean a group of companies co-funding the rehabilitation of a local watershed (e.g. reforesting upstream areas to improve groundwater recharge and reduce sedimentation in rivers), or partnering with communities and NGOs to build small dams or rainwater harvesting systems that benefit all users. Companies such as breweries, textile factories, and agribusiness processors in water-stressed basins have formed or joined local water stewardship platforms (often under frameworks like the Alliance for Water Stewardship or the CEO Water Mandate) to collectively manage water resources more sustainably. These collaborations can also open dialogue between industry, farmers, and government on fair water allocation during droughts, hopefully preventing the worst outcomes for all sides.

Another strategy is diversification – of both water sources and supply chains. Where feasible, businesses try to secure multiple water sources (e.g. rights to surface water plus backup groundwater wells, plus recycled water use). Agribusinesses might invest in irrigation infrastructure that can draw from different sources (a river and a reservoir, for example) to have options in dry periods. Diversifying supply chains can mean sourcing raw materials from multiple geographic regions to avoid putting “all the eggs in one basket” of a drought-prone area. A tea or coffee exporter, for instance, might develop supplier bases in both East Africa and Southern Africa so that a climate shock in one does not entirely cripple supply. Of course, not all businesses have this flexibility, but larger multinationals often do.

It must be said that water risk management is generally less mature and more challenging than energy risk management. Many of the measures described (community water projects, river basin councils, etc.) are in early stages and require trust-building and long-term engagement – something outside the traditional remit of private companies. The costs of serious water infrastructure (dams, large-scale recycling plants, desalination) are typically beyond any single business and require public-sector investment or public-private partnership. By contrast, many energy solutions are within a company’s direct control to implement on a reasonable timescale. This disparity means that while almost every large business in Africa has a concrete plan for dealing with power outages (even if it’s just “run the generator”), far fewer have a comprehensive plan for a future of worsening water scarcity. Nonetheless, forward-looking companies are starting to incorporate water into their enterprise risk management, often spurred by investor pressure via sustainability reporting. Water use disclosure (e.g. through CDP Water questionnaires) and the setting of water reduction targets are becoming more common, slowly driving companies to take water as seriously as energy in their resilience planning.

Answering the Core Question: Which Risk Is Bigger?

So, is water supply now a bigger risk than energy supply for businesses in sub-Saharan Africa? The evidence suggests a nuanced answer: water risk is rapidly emerging as at least an equal, if not greater, long-term threat, especially for sectors like agribusiness and water-intensive manufacturing – but in the short term, energy unreliability still often poses the more immediate operational challenge in many locales. In other words, the dominance of risk is context-dependent, varying by sector, location, and time horizon.

In the short term (day-to-day operations), many businesses would still cite electricity outages as the more frequent and acute problem. Power cuts happen weekly or even daily in some countries, whereas water crises (total loss of water supply) tend to occur over longer intervals or during specific drought episodes. For a generic light manufacturing firm (say a packaging factory) not heavily reliant on water, energy is likely the top concern today because it directly affects production uptime and costs on a continual basis. The infrastructure and reliability of power in sub-Saharan Africa, unfortunately, remain poor in many places as of 2025, and despite progress in renewable energy, the gap is yet to be fully closed. Thus, for many businesses, the next 1–3 years of operational risk are still dominated by keeping the power on.

However, when we extend the horizon to the medium and long term, water risks loom larger and become more strategic in nature. Climate projections and usage trends indicate that water scarcity will intensify in much of sub-Saharan Africa, potentially imposing absolute limits on growth and even sustaining current operations. Companies involved in agriculture, beverages, food, textiles, mining, and others that are water-reliant are increasingly recognising water as the more existential risk. You can truck in fuel or install solar panels, but you cannot truck in enough water to irrigate thousands of hectares during a regional drought (at least not economically), nor can a city’s industries function if the dams run dry. The 2018 close call with Cape Town’s water supply (“Day Zero”) was a wake-up call: it demonstrated that even relatively advanced African economies could face a scenario where businesses and residents alike have virtually no water. Many firms in that region learned that while they had contingency plans for power cuts, they were far less prepared for a water cutoff – and the experience spurred new investment in boreholes, recycling, and contingency water contracts.

Conclusion

In conclusion, water supply is increasingly rivalling and in many cases overtaking energy supply as a major risk for businesses in sub-Saharan Africa – particularly for those in agriculture and water-dependent industries and especially over the long run. Energy unreliability remains a serious hurdle, causing short-term disruptions and costs, but it is a challenge with known solutions and improving prospects thanks to technology and investment. Water scarcity, driven by climate change and mismanagement, represents a more profound threat that is harder for any one business to fix and could fundamentally cap growth in certain regions. Business leaders, investors, and risk managers in Africa must therefore broaden their focus: securing resilient energy systems and sustainable water use in tandem. Companies that proactively address both – by boosting energy self-sufficiency and participating in water stewardship – will be better placed to thrive in a resource-constrained future. The question is not so much water vs. energy as which risk can be mitigated more readily and which one poses the greater existential challenge. The answer appears to be that keeping the lights on is vital for today, but keeping the water flowing will define success for tomorrow. In the African context, where the impacts of climate change and development pressures are converging, water is indeed emerging as a material resource risk – one that demands collective action now to ensure it does not dampen the region’s economic ambitions.

References

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• Grobler, J. (2016, July 13). ‘Extreme measures are needed’: Namibia’s battle with drought comes to its cities. The Guardian. (Case study of Coca-Cola Namibia halting production and other business impacts during a severe drought)

• International Energy Agency. (2025). Financing Electricity Access in Africa – Executive Summary. IEA, Paris. (Statistic on 600 million Africans lacking electricity access)

• Kuzma, S., Saccoccia, L., & Chertock, M. (2023, August 16). 25 countries, housing one-quarter of the population, face extremely high water stress. World Resources Institute. (Analysis of WRI Aqueduct data; includes projection of 163% increase in water demand in sub-Saharan Africa by 2050 and potential GDP impacts)

• Stockholm International Water Institute. (2005). Making water a part of economic development. https://siwi.org/wp-content/uploads/2015/03/csd_making_water_part_of_economic_development_2005-3.pdf

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• World Bank. (2021, April 26). Businesses in Nigeria lose $29 billion annually to poor electricity. (World Bank press release / fact sheet presented by Ashish Khanna, detailing economic losses due to unreliable power in Nigeria)

• World Meteorological Organization. (2022, September 8). WMO State of the Climate in Africa 2021: Water stress and hazards. WMO Press Release. (Provides figures on population under water stress in Africa, and historical impacts of droughts/floods, e.g. drought-related losses of $70 billion in 50 years)

• World Meteorological Organization. (2024). State of the Climate in Africa 2024 – Key Findings. WMO. (Highlights from 2024 report, including the impact of low water levels on hydropower at Kariba Dam causing power outages in southern Africa)