Template-Type: ReDIF-Paper 1.0
Author-Name: Kim Walsh
Title: Special Occasional Bulletin of Economic Notes 2301 Review of Administered Prices in South Africa Water Tariffs August 2023
Abstract: Water tariffs are set by each of the 144 water services authorities (WSAs) in South Africa each year. No comprehensive data set for the water tariffs in all WSAs is publicly available, so there is no way to determine the increase in water price in each WSA. Stats SA data suggest that water prices increased steadily above inflation between 2017 and 2022. The extent to which this is true will be different in each WSA. The setting of retail water tariffs by WSAs is part of the overall annual municipal budget process. Tariffs are set to achieve the revenues required to ensure an overall funded budget. This is an inherently political process. Outside of the metropolitan municipalities, few WSAs use any tool or methodology to set water tariffs; these tariffs are typically simply increased at a rate that blends the consumer price index and any increase in the bulk water tariff paid to a water board (where they are in place). Factors that have driven increases in the costs of water provision include (1) slower growth in infrastructure grants; (2) high growth in employee-related costs; (3) high growth in bulk water costs; (4) high growth in electricity costs; (5) high growth in debt impairment; and (6) high levels of non-revenue water. Rising water scarcity and historic under-investment in asset management are anticipated to be key drivers of the need to increase water prices in future. Recommendations include (1) strengthening the economic regulation of water pricing; (2) establishing a publicly accessible database for water tariffs; (3) introducing a requirement for separate financial reporting for each municipal trading service, including water; (4) providing urgent support to municipalities to contain employee-related costs; (5) municipalities reintroducing debt collection and credit control measures, accompanied by careful indigent management; and (6) containing and reducing levels of non-revenue water. Funding freed up through these interventions should be directed to improved asset management.
Creation-Date: 2023-08-07
File-URL: https://www.resbank.co.za/content/dam/sarb/publications/special-occasional-bulletins/2023/special-occasional-bulletin-of-economic-notes-2301-review-of-administered-prices-in-south-africa-water-tariffs-august-2023.pdf
File-Format: application/pdf
File-Function: Revision
Number: 11004
Handle: RePEc:rbz:specialoboens:11004