Instead of asking "Will Capetown be the first city to run out of water?" they could just as well ask "Is Capetown the first city to misprice water?" It appears to have been written by someone who has never heard of a "market".
Just raise the price so supply equals demand. This will incentivize people to conserve, and you will quickly see lawns replaced by xeriscapes. It will also incentivize entrepreneurs to produce more water and provide innovative conservation equipment.
If they are worried about "the poor" then a simple measure is to use tiered pricing, and provide the first 10 or 20 liters per person at low cost, or even free.
Markets can't solve every problem, but they can certainly solve this one. This is just a classic mismatch of supply and demand.