Strategy& and PwC explore key risks around energy, water and extreme weather

Global strategy consulting firm Strategy& and parent PwC have released their latest Economic Outlook report for South Africa, examining three key risks facing the South African economy: energy issues, water supply shortages, and extreme weather events.

The 2025 edition of the Global Risks Report, released recently at the World Economic Forum in Davos, identified energy and water supply shortages among South Africa’s biggest risk factors over the next two years, while global results included extreme weather events as a top-three risk.

The new Strategy& and PwC Economic Outlook report looks at the status quo of these three challenges in South Africa, and additionally, approaches for local businesses to mitigate these and associated risks.

Energy disruption

Energy disruptions remain the number 1 concern for business leaders. Even after load-shedding was suspended in March 2024, they feared energy shortages as a key challenge in 2025–2026. Despite the absence of planned power outages for most of last year, business leaders likely remained concerned about electricity cuts due to continued large volumes of unplanned generation breakdowns near 12,000 MW.

Elsewhere, their concerns extended to jet fuel and gas shortages, with the country seeing increased dependency on energy imports.

South African companies facing electricity and gas shortages need an energy action plan. Since load-shedding began, many have reduced dependence on public power and imported hydrocarbons. A comprehensive energy strategy includes energy efficiency measures, renewable energy investments and alternative fuel generators. An energy audit is crucial to identify efficiency opportunities and cost savings, ensuring reduced reliance on traditional energy sources.

Water shortages

Water shortages are, unfortunately, becoming commonplace in South African society. Nearly half of the country’s municipal water supply systems (WSSs) performed poorly or at a critical condition due to multiple reasons. These systems are experiencing increasing levels of non-revenue water – the difference between the amount of water injected into the water-supply system and the actual amount of water billed to customers.

Non-revenue water increased from around 42% in 2014–2015 to above 46% in 2021–2023.

Nino Manus, Water Management Leader at PwC, said: “South Africa is challenged by deteriorating water supply due to several factors, including over-consumption, aging infrastructure, maintenance challenges, pollution and extreme weather. Businesses need to understand the risk of water shortages to their operations and take appropriate action to reduce this risk. This could include recapturing and reusing water, installing backup water systems on the municipal feed, as well as rainwater and greywater harvesting.”

“It is also important to consider collaborative mechanisms that businesses can leverage to help municipalities address the infrastructure challenges in their geography.”

To mitigate water supply risks, businesses can recover, recapture and reuse water, implement backup systems and harvest rainwater and greywater. Conducting a water risk and usage baseline assessment is crucial for developing a water strategy. Collaborating with the public sector can address infrastructure and related service delivery challenges.

In a broader economic context, improved natural capital management could result in water and biodiversity making a larger contribution to the country’s labour productivity.

Extreme weather

Extreme weather events like droughts, floods, hailstorms, heatwaves and wildfires have caused significant economic disruptions in South Africa in recent years. Climate factors like heat stress and drought can adversely impact the production of, for example, essential commodities like food products and minerals. Droughts have already affected mining in South Africa, with the industry having faced a severe drought in 2015–2017, when water scarcity led to mine closures and job losses.

Workers are concerned: a study from PwC found that nearly half (44%) of South African respondents believe that disruptions from extreme weather events will impact their ability to do their job.

Responding to risks associated with extreme weather requires according to Strategy& and PwC three steps.

Firstly, identifying physical and transition risks across different climate change scenarios is essential for businesses to prepare for future uncertainties, as these risks can directly impact assets and productivity. Secondly, evaluating a business’s vulnerability to climate change involves assessing the exposure and sensitivity of its assets, infrastructure, operations and strategy, helping to prioritise areas for intervention.

Finally, designing effective adaptation solutions requires a comprehensive approach that considers technological, nature-based and behavioral options, while also monitoring for potential maladaptive solutions that could inadvertently increase vulnerability.

Christie Viljoen, Lead Economist for Macro Analysis at PwC said: “Extreme weather events like droughts, floods, hailstorms, heatwaves and wildfires have caused significant economic disruptions in recent years. These occurrences impact businesses across all industries by reducing water supply, damaging infrastructure and increasing operational costs. South African companies must identify risks, assess vulnerabilities and plan adaptations to mitigate these effects and ensure resilience.”