Water Pricing

A variety of factors are putting substantial pressure on water tariffs in South Africa. These factors range from rising electricity costs (and related increased costs for water pumping), increased treatment costs, the much-needed refurbishment of certain assets and the development of new water infrastructure. Indeed, the Department of Water and Sanitation (DWS) has estimated that over R700 billion is needed over the next 10 years to support the effective management of the water sector. Of this R700 billion figure, only 45% is currently budgeted for by government, with the shortfall likely to be addressed by tariff increases. The effect of this national investment requirement on water tariffs could therefore prove significant.

In addition, poor municipal billing systems in many instances, significant water leakage and high rates of non-revenue water (water provided for which no income is received) also serve to place upward pressure on water tariffs, due to revenue collection gaps.

Given the above context, the NBI is currently undertaking research that considers the different cost drivers across the water value chain, and assesses how these drivers could impact on South African companies in the short and medium term. Emphasis is placed within the study on understanding where investment in the water sector is considered necessary, and the extent to which the raising of water tariffs will indeed solve a number of South Africa’s pressing water challenges.