Water Regulations: Do We Need Them?

People have been warning about the risk of water wars for years now. And perhaps because I worry about it more, it does seem like water shortages are more frequent. Even putting climate change to the side, this is not surprising: we are urbanising rapidly. And no one really thinks about ‘water availability’ or ‘geography’ when they move to a new city. They just assume that where there are people, water will be provided. And what the government doesn’t deliver, the free market will step in to provide. So why would we need something as socialistic as ‘water regulations’ anyway?

Regulations are often bad

I’m really not the biggest fan of regulation. Last week, I was stopped at a Zimbabwean police road block. It was raining, and I was told that I was driving with both my fog lights and my headlights on at the same time. This, apparently, is illegal. I was shown the fine sheet – which did indeed include a note for a $20 fine for driving with a fog light on at the same time as your headlights. It was also a charge ‘per lamp’, which meant that my total fine was for $40 (the car, unfortunately, comes equipped with one fog light per headlight). Although this does violate a statutory spot fine limit. And subsequently, I’ve discovered that the only regulation to even vaguely mention this rule has been repealed.

But because the charge sheet hasn’t been amended, and because policemen don’t really entertain arguments about the regulation they’re enforcing (after all, if they’re enforcing it, so they already believe the ‘alternative facts’), it’s either pay the fine, or get arrested and make your argument in court. And genuinely though, who has the time? So I shirked my moral and civic duty, and paid the fine – at which point, the officer asked me for a job.

You can’t make this stuff up.

The point is, this is your classic nanny-state regulation that gets taken and abused by those with power. The regulation itself is out of date (if it was ever in date) – and it doesn’t actually exist (although it definitely does when you are faced with a police officer who has a collection target for the morning, and also knows that you are going to regret the loss of your time more than he will). It is a regulation without purpose – unless that purpose is revenue collection.

So should we just abandon regulations altogether?

When no regulations are worse

My other Zimbabwean story is the dropping of Harare’s water table. Because the water infrastructure has fallen into such disrepair over the last two decades, almost all water supply is private. All homes have some kind of a water storage facility. Most homes fill them with drilled boreholes on their property – the rest rely on water tankers to make regular deliveries.

So the next question is: where do the private water suppliers get their water from?

The general understanding is that these water suppliers buy up urban land that has flourishing access to the underground aquifers and rivers. They then drill multiple boreholes down deeper than your average home’s borehole, and pump away. Their capital cost is the land, the drilling and the pump – thereafter, the more water they extract, the more profit they make.

There is a caveat here: as long as the water table is replenished faster than it is depleted, everyone is fine.

But when there is a drought, as there has been for the last few years, the water table starts to fall.

There are some implications to this:

Because residential homes have shallower boreholes and/or wells, those are the first to go dry.
Residential homeowners have a choice: they can either go through the expensive and risky process of drilling a new borehole (you’re not guaranteed to hit water, after all), or they can ‘temporarily’ pay for water deliveries until the drought lifts.
Because water deliveries are cheaper and easier, there tends to be an increase in the demand for them. That in turn means more water pumping by the water suppliers, which accelerates the underground water drainage (and increases the profitability of a deep borehole).
As the drought continues, the water table continues to drop. As more boreholes go dry, business picks up for the private water suppliers.
And you end up in a situation where the faster they pump water, the faster they lower the water table, the more people that demand their product, the higher they can raise their prices, and the more capital they have to drill deeper boreholes and establish barriers to entry for competition (even if that competition is the local homeowner that ordinarily would supply himself with water).

Here is the somewhat murky problem: in some ways, the private water suppliers are essentially stealing the water, and then selling it back to the people they’ve stolen it from.

I guess it’s a question of how deep your land entitlement goes (do you just own the land on the surface, or the first two metres of soil underneath the demarcated title deed, or all the way down?). But here’s a comparison: if I have a peach tree on my property, but someone came along with a drone that could pick the fruit off my tree without ever stepping foot on my land, would we call that theft?

Do I own the air above my land? How does the two-dimensional title deed translate into three dimensional space?

But those existential questions aside: the real issue is whether capitalist free market business interests should have completely unregulated access to underground water.

The Yemen Conflict

One of my newly-discovered favourite podcasts is ‘Reveal’ from the Centre of Investigative Reporting. And one of their most recent episodes is called ‘Water Wars‘ (at least, at the time that I wrote this). It sounds like dystopian science fiction, which makes it terrifying.

But it turns out that there are some wikileaks-released classified cables between the State Department and Stephen Seche, the United States Ambassador to Yemen between 2007 and 2010. In those cables (which I found and read on wikileaks, but feel weird talking about), there is much concern about Yemen’s water crisis. And specifically, how it was leading to widespread social unrest.

Things to be aware of:

Yemen used to be one of the world’s foremost coffee producers. In case you’ve ever wondered, the term ‘mocha’ derives from the Yemeni port of Mocha. And it’s probably also the reason that we’re such fans of arabica coffee beans.
But in the last few decades, Yemen’s agricultural production shifted away from coffee and grapes, and toward the production of qat, the leaves of an Arabian shrub that are chewed as a mild stimulant.
Qat plants require five times as much water as grapes, but can be harvested all year round. Also, the more water they receive, the more productive the plants are. Farmers really have no incentive to water their plants less – the more water they use, the more cash they generate. So they’d flood their fields twice a month.
In 2010, it was estimated that 90% of Yemen’s water consumption was being used on small-scale agriculture, 50% of which was the production of qat. That small-scale agriculture only counted for 6% of GDP.
As is often the case with high-yield cash crops, they attracted large vested interests. Yemen’s Water and Environment Minister at the time, Abdulrahman Al-Eryani, estimated that 99% of Yemen’s water extraction was unlicenced. According to Al-Eryani, there were over 800 drill rigs operating in Yemen in 2009. Compare this to Jordan, which only had three. Or India, with a population more than 50 times that of Yemen, that had only 100.
In the 1970s, the water table of Yemen’s capital Sana’a was 30 metres below the surface. As of 2012, in some areas, the water table had dropped to 1,200 metres below the surface.
The fear was that Sana’a would be the world’s first capital to run out of water. And the warning was that the lack of water was causing social unrest and instability.
In February 2010, Christopher Boucek of the Carnegie Endowment for International Peace, wrote in testimony about Yemen to the US Congress: “The failure to establish local water corporations in several governorates that historically have not received much support or social services from the central government has raised fear that a resurgent al Qaeda may seek refuge there.”
Many draw a connection between the state of Yemen’s water table and the civil war that broke out in 2015.
And yes, ISIL is a belligerent.
But even if you think the two are not connected, the civil war has led to shortages of diesel to pump water out of the remaining aquifers (of the 15 primary aquifers, it seems that all but two had run dry by 2015). So 20 million people do not have access to water.
That is 20 million people who are about to become a refugee problem.

Yemen’s civil war might just be the world’s first Water War.

And I can’t help but think that banning qat production might have been better than allowing water drilling to go completely unregulated.

Rolling Alpha posts opinions on finance, economics, and the corporate life in general. Follow me on Twitter @RollingAlpha, and on Facebook at www.facebook.com/rollingalpha.