Most water management areas (WMAs) and Water Service Authorities (WSA) in South Africa suffer from varying degrees of water supply volatility, which is usually accompanied by temporary but frequent water shortages. On the demand side, a potential contributor to water shortages is an inefficient water pricing system. Inefficient pricing policies can promote excessive usage in the short term, putting unnecessary pressure on water supply. Equally, it can also contribute to a culture of excessive water use in the long-term, if domestic and non-domestic water consumers do not adjust their economic decisions to consider the true value of water. An increasingly popular option being implemented internationally is the dynamic water pricing model. Essentially, dynamic tariffs adjust to reflect the degree of water scarcity at a given point in time to send the signal of water supply constraints to final consumers.
The Public and Environmental Economics Research Centre (PEERC) is undertaking exploratory research on the opportunities for the incorporation of scarcity and climate change factors into the water pricing system in South Africa, through the use of a dynamic pricing model. This seminar presents the preliminary findings of the research and looks to elicit stakeholder inputs towards the improvement and finalisation of the research and recommendations.
