By MoneyMorning.com.au
If you ever get the chance to hang out with a member of the Fergusson family, you should probably take it.
I’ve been talking to Adam Fergusson, author of When Money Dies, about the hyperinflationary risks inherent in the super-loose monetary policies of the West, for some time now. He’s fascinating. I had a totally different – but just as interesting – conversation with his son James, author of Taliban – The True Story of the World’s Most Fierce Fighting Force, about water.
Water is an oddly undervalued resource, and many big investment houses now have it as one of their long-term investment themes. However, James says that we still aren’t taking water shortages as seriously as we should.
Water and the Lesson of Afghanistan
Consider Afghanistan. In the 1950s, the Americans figured that you could irrigate the south if you canalised the Helmand River. So, in partnership with the Afghan government, that is what they did – and the results were good. Ample irrigation meant that a huge fruit export industry sprung up (Canadian troops in Kandahar recently were billeted in a former fruit canning factory). Then it went bad: the canals were all but obliterated during the Soviet invasion and war of the 1980s. On top of that, the 1990s brought drought. So the supply of fertile arable land plummeted just as the population started to rise rapidly.
What was the result? Huge pressure on the land and a drive to find more profitable crops. Those crops? The poppies that currently finance much of the war in Afghanistan. 90% of the world’s poppy production comes from Afghanistan and 90% of Afghanistan’s poppy production comes from around Helmand. It’s a complicated conflict but, in this particular area at least, the scarcity of water underlies it.
Helmand isn’t the only place where this is the case. The conflict in Darfur can be easily traced to pressure put on grazing rights caused by drought. And what of the epicentre of hydro politics: the Nile, the river that irrigates much of Africa from Egypt to Uganda? There has been bickering over the waters for centuries.
Now, though, the situation appears worse than usual. Ethiopia, which contributes about 80% of the Nile’s flow, is planning four large dams on the Nile – one of which will contain the largest hydroelectric plant in Africa. This project is intended to create a vast reservoir (1,680 square kilometres) to safeguard the country’s future water and power needs. The problem? If it is completed (it won’t come cheap and Ethiopia isn’t rich), it will take something in the region of seven years to fill when built. Ethiopia claims this won’t affect water flow to Egypt, and its agriculture-dependent economy. Others say it could cut it by 25%. How’s that for conflict potential?
Water Shortages Are Dangerous
Another example of the impact of water shortages on seemingly modern life comes from Sanaa, the capital of Yemen. It is soon to have the dubious distinction of being the first global capital city to run out of water. Four times as much water is being removed from the area as is replaced each year. By 2017-20 (depending on whose estimates you believe), it should be all gone. That doesn’t seem to be a problem that will solve itself.
Finally, I can’t mention water without mentioning China – a country where 20% of the global population lives on only 5% of the world’s fresh water supply; where the water table is falling fast; where the price of water is rising; and where President Hu Jintao has noted that water shortages affect “China’s economic security ecological security and national security.”
James Fergusson’s point is that, while we are all aware of the water problem, we aren’t perhaps fully aware of how much trouble it is causing already – and of how fast countries need to move on investing in the water infrastructures needed to keep that trouble contained.
Merryn Somerset Webb
Editor in Chief, MoneyWeek (UK)
Publisher’s Note: This article first appeared MoneyWeek (UK).
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Water – The World’s Most Undervalued Resource
