Administered Prices Study on Economic Inputs: Water Sector

by MULLER, M., 2007
HSRC report prepared for NEDLAC, Trade and Industry Chamber, NEDLAC, August 2007

The water services and distribution sector component of the Nedlac Administered Prices Study on Economic Inputs sought to quantify the impact on investment and job creation of the pricing and quality of services set through administered pricing mechanisms. This component of the study covered municipal supplies of water to domestic, commercial and industrial consumers, and utility supplies to large industrial consumers by the trading units of the Department of Water Affairs and Forestry (DWAF) as well as water boards and related entities. Two companion reports examine the ports and rail sectors respectively. (LINKS TO INFRA05 AND 06)Muller reports the levels of and trends in water prices in South Africa and outlines how they are determined. The study seeks to evaluate whether the price of water to industry reflects the costs incurred in making that water available and whether the price-setting process leads to optimal, or at least reasonable, outcomes. In drawing conclusions, reference is made to relevant benchmarked countries The study found that prices for water supplied to industry in South Africa generally rose faster than inflation. While CPIX rose by 32% between 2001/02 and 2005/06, municipal water prices to industry rose by 62%, domestic prices by 60%, and prices for bulk supplies from water boards by 42%. Prices for bulk water supplied by DWAF rose by an average of 21% over the period 2002/03–2005/06, when CPIX rose by only 16%.