In early 2018, the city of Cape Town, South Africa faced a water crisis. Three years of drought, outdated infrastructure, and poor planning had led to record low water levels in the city’s reservoirs. For months, the city’s 4.6 million inhabitants faced the imminent threat of “Day Zero,” the day when the city would simply run out of water. A combination of government awareness campaigns, restrictions, tariffs, and a new water pressure system eventually averted Day Zero, but the crisis came at significant cost.1 The overall economic impact of the drought on the Western Cape—the province in which Cape Town is located—was estimated to be 3.4% of the province’s GDP and 0.3% of South African GDP.2 International financial markets took notice: Moody’s issued a report in 2018 saying that the water crisis in the city was credit negative and there were fears at the time that the whole of South Africa would be downgraded.3

South Africa is not the only place to be severely impacted by water shortages in recent years. California’s drought in 2021 cost the agricultural sector in the state more than $1.1 billion. A lack of precipitation in the summer of 2017-2018 in South America led to losses upwards of $3.5 billion in Argentina and Uruguay.4,5 Kenya, Somalia, and Ethiopia experienced a multi-season drought that started in 2021 and killed an estimated 3.6 million livestock.6 Taps ran dry in the city of Monterrey, Mexico in the summer of 20227 and in parts of Southeast England in the summer of 2023.8