Water resource management looms as one of the greatest global challenges of the 21st century. Around the world, businesses, governments, and policy makers alike must work together to move beyond business as usual not only to increase the supply and improve the productivity of current resources but also to reduce withdrawals by reshaping underlying economic activities. In South Africa, the challenge is complex: a semiarid country characterized by low rainfall, limited underground aquifers, and a reliance on significant water transfers from neighboring nations, South Africa will face difficult economic and social choices between the demands of agriculture, key industrial activities such as mining and power generation, and large and growing urban centers. However, a recent report by the 2030 Water Resources Group, for which McKinsey provided analytical support, finds that solutions are possible and need not be prohibitively expensive if they are addressed now.¹

Exploding growth in world populations and increased agricultural and industrial production are putting a strain on existing water supplies worldwide. According to estimates by the Water Resources Group, global water demand is on track to outpace supply by 40 percent within the next two decades. When compounded with the potential effects of climate change, the stakes are raised even higher. Further complicating this challenge is the reality that there is no singular water crisis: different countries, even in the same region, face very different problems. India, for instance, faces demand fueled largely by the agricultural sector as a growing population increasingly moves toward a middle-class diet that relies more heavily on wheat and sugar. In China, by contrast, a large agricultural sector is coupled with a fast-growing economy that is driving rapid industrial growth and domestic urbanization.