This summer in Gauteng has been unsettling. Not because it has rained, summer rain is normal, but because of how it has rained. Heavier downpours, more frequent storms, and a sense that the timing and intensity are no longer lining up with what our cities and systems were built for. At the same time, the Western Cape is experiencing a very different, but equally disruptive, climate shock: widespread wildfires and an intensifying water crisis that has pushed parts of the province toward emergency conditions, including the threat of “Day Zero” in Knysna in the Garden Route.
Weather is not climate, and economists should be careful not to conflate the two. Heavy rain in Gauteng, fires across the Western Cape, and acute water scarcity in a coastal town like Knysna are not the same phenomenon. But economics is about risk, expectations, and systems under stress. When “unusual” events begin to recur often enough to disrupt infrastructure, budgets, and behaviour, they stop being anomalies and start looking like a structural shift.
That is where climate change moves from an abstract global concern to a local economic problem. Not something that might matter in the future, but something that already affects infrastructure, budgets, productivity, and household welfare. From storm- damaged roads and drainage systems in Gauteng, to fire-threatened settlements and emergency water restrictions in the Western Cape, climate impacts are increasingly shaping day-to-day economic outcomes. The question, then, is not whether climate change is real. It is what it is costing South Africa already, what it is likely to cost if we continue largely as we are, and whether our response makes economic sense.
Asking about the “cost of climate change” sounds straightforward, but it rarely is. Climate costs do not arrive as a single, neat line item. They accumulate through damaged infrastructure, lower productivity, agricultural losses, fiscal pressure, and deep distributional effects. In South Africa, these costs interact with binding constraints we already face: water scarcity, spatial inequality, uneven municipal capacity, and ageing infrastructure. Climate change does not create these problems, but it magnifies them.
Some attempt has been made to quantify the macroeconomic implications of climate change for South Africa. The World Bank’s South Africa Country Climate and Development Report (CCDR) approaches the issue by examining how climate risks, emissions reduction, and adaptation interact with the country’s development objectives, particularly growth, employment and inequality.[1] Rather than presenting climate change as a narrow environmental problem, the CCDR frames it as a structural constraint on development, highlighting how climate impacts on agriculture, labour productivity, infrastructure and how fiscal capacity can weigh on long-term economic performance if left unaddressed.[1] Under a high-emissions, pessimistic climate scenario, the report estimates net present value damages of roughly R1.5 trillion between 2022 and 2050. That translates into an average loss of about 0.8% of GDP over the period, rising toward around 1.2% of GDP by mid-century.[2]
These numbers are not worst-case scenarios, and they are not comprehensive. Health impacts, ecosystem degradation, municipal service failures, and displacement effects are largely excluded. Still, even within this limited scope, the conclusion is uncomfortable. A permanent loss of close to 1% of GDP is not dramatic in any single year, but over time it materially weakens growth, fiscal capacity, and employment outcomes in an economy that already struggles to expand.
Recent events make these costs easier to see. The April 2022 floods in KwaZulu-Natal caused property damage estimated at around R17 billion, excluding longer-term losses associated with disrupted transport, electricity, water, and sanitation systems.[3] Floods of this kind are not just short-term shocks. When infrastructure is damaged and rebuilding is slow or uneven, productivity losses persist well beyond the initial event.
Drought tells a similar story through a different channel. During the 2017/18 drought, estimates suggested losses of about R5.9 billion in Western Cape agriculture, alongside roughly 30,000 job losses.[4] Earlier drought analysis linked the 2015/16 drought to maize import costs of between R11 and R14.5 billion, feeding directly into food prices and the trade balance.[5] More recently, the 2025 Western Cape fire season itself is estimated to have burned roughly 90,000 hectares of land and destroyed dozens of structures, with preliminary figures indicating significant, if still-incomplete, damage to farms, homes and ecosystems across the province and suppression efforts alone involving dozens of aerial missions and firefighting resources [10]. These are not abstract climate costs. They show up in inflation, employment, fiscal reallocations, and household welfare.
New examples from early 2026 underscore these dynamics. In the Western Cape, a combination of extreme heat, low rainfall and below-average dam levels has pushed multiple municipalities into crisis. Western Cape authorities are seeking a provincial state of disaster declaration in response to both escalating wildfires and an intensifying water shortage, a move intended to free up resources and streamline response efforts by government. Wildfires have spread across several districts, straining firefighting capacity and threatening homes and infrastructure, while depleted water supplies compound the emergency response challenge. Provincial Local Government MEC Anton Bredell has said that both fires and water supply issues are placing mounting pressure on municipal systems. In Knysna, Akkerkloof Dam, the town’s primary water source, fell to critically low levels, prompting warnings that the reservoir could be depleted within days without significant improvements or consumption reductions.[6] Authorities have imposed strict water restrictions, and emergency planning continues as residents are urged to conserve water to avert a full “Day Zero” scenario.[7]
Climate change also increasingly presents itself as a public finance problem. As disasters become more frequent, government spending is pushed toward emergency response and rebuilding. South Africa’s National Treasury has explicitly warned that rising disaster costs can erode the state’s ability to meet its obligations, particularly when shocks are financed reactively rather than through planned risk management instruments.[6] One example is the exploration of parametric disaster insurance instruments for municipalities, where National Treasury is engaging with the insurance sector and piloting index-based insurance products that pay out on predefined triggers (e.g., extreme rainfall). While this work is ongoing, clarity on pricing, structure, and implementation timelines has yet to be provided. These instruments can speed up payouts and improve fiscal planning but they come at an additional premium cost to municipalities, adding to their overall financial burden as they adapt to climate risk. [11] [12] In practice, even when damages originate in the private sector, the state often absorbs the costs: repairing roads and bridges, restoring water treatment works, relocating vulnerable communities, and extending social support. These expenditures compete directly with long-term investment.
This is where adaptation enters the discussion, often framed as expensive and discretionary. The evidence suggests otherwise. The same World Bank report estimates that South Africa’s adaptation investment needs amount to between R1.8 trillion and R2.4 trillion in net present value terms between 2022 and 2050, equivalent to roughly 0.9–1.3% of GDP per year.[2] The largest components are water systems, urban and municipal resilience, transport infrastructure, and climate-resilient agriculture.
These are large numbers, but they are strikingly similar in scale to the estimated damages from inaction. [9] The difference is that adaptation spending is planned investment, while damages arrive as shocks, often concentrated in places with the least capacity to absorb them. From an economic perspective, adaptation is risk reduction. It lowers expected future losses and reduces exposure to tail risks, exactly the kind of trade-off that matters in a fiscally constrained environment.
This also reframes the mitigation versus adaptation debate. South Africa does need to reduce emissions. Global trade dynamics, carbon border measures, and investor preferences will increasingly penalise carbon-intensive economies. Mitigation alone does not protect Gauteng’s stormwater systems, informal settlements on floodplains, or water infrastructure designed for a different climate distribution. Adaptation deliver local and immediate benefits regardless of global coordination failures. It is not an environmental luxury; it is development under new constraints.
As economists, there is a temptation to keep refining cost estimates, searching for the definitive number that settles the debate. But climate change is characterised by uncertainty, non-linearity, and compounding effects. The more relevant question is not whether the cost is exactly 0.8% or 1.2% of GDP. It is whether it is cheaper to invest deliberately in resilience now, or to keep paying for breakdowns, disasters, and lost growth later.
The “weird weather” many people are noticing in Gauteng is where this becomes concrete. Rain is not just rain in a city with constrained drainage, compromised river systems, uneven land-use enforcement, and limited municipal capacity. In that context, a climate shock is not merely a meteorological event; it is a stress test of institutions, infrastructure, and planning assumptions.
Climate change is already here. The costs are already being incurred. The remaining choice is whether we continue paying them reactively, through repeated crises, or whether we start paying them upfront, through investment, maintenance, and adaptation. From an economic point of view, that should not be a difficult choice.
When the climate shifts, the costs follow
References
1. World Bank (2022). South Africa Country Climate and Development Report. https://openknowledge.worldbank.org/entities/publication/c2ebae54-6812-51d3-ab72-08dd1431b873
2. World Bank Group (2022). Country Climate and Development Report. https://soer.environment.gov.za/soer/UploadLibraryImages/UploadDocuments/17102 3114825_Country%20Climate%20and%20Development%20Report%202022.pdf ?utm_source=chatgpt.com
3. Mudefi, E (2023). Disaster management ‘deeds’ in the context of April 2022 KwaZulu-Natal floods: A scoping review https://www.sciencedirect.com/science/article/pii/S2212420923006027
4. BFAP (2018). Drought Policy Brief: Western Cape Agriculture. https://www.bfap.co.za/wp-content/uploads/2023/05/DroughtPolicyBrief_2018.pdf
5. BFAP (2016). Policy Brief on the 2015/2016 Drought. https://www.bfap.co.za/wp-content/uploads/2025/07/BFAP_Drought-Policy-Brief_5-February-2016.pdf
6. Western Cape govt wants provincial state of disaster amid fires, water crisis | News24. https://www.news24.com/southafrica/news/western-cape-govt-wants-provincial-state-of-disaster-amid-fires-water-crisis 20260113-0607
7. Knysna Day Zero: 13 days of water left, ‘every litre matters’ | News24.https://www.news24.com/southafrica/news/knysna-day-zero-13-days-of-water-left-every-litre-matters-20260108-0685
8. National Treasury (2025). Disaster Response Financing Strategy. https://www.treasury.gov.za/comm_media/press/2025/Annexure%20A%20Disaster%20Response%20Financing%20Strategy%20v8.pdf
9. See adaptation needs estimates in World Bank Group (2022).
10. Western Cape faces critical fire season and looming water crisis. Weekend Argus. https://capeargus.co.za/weekend argus/news/2026-01-09-western-cape-faces-critical-fire-season-and-looming-water-crisis
11. National Treasury (2025). Treasury releases documents on enhancing South Africa’s approach to disaster risk insurance. https://www.gov.za/news/media-statements/treasury-releases-documents-disaster-risk-insurance-approach-01- aug-2025
12. National Treasury (2025). Treasury on enhancing South Africa’s approach to disaster risk insurance. https://www.gov.za/news/media-statements/treasury-enhancing-south-africa%E2%80%99s-approach-disaster-risk-insurance-01-aug