Concerns about the sufficiency of freshwater supplies and the impact of water shortages
have placed sustainable water management on the global agenda. This is particularly
relevant in South Africa, a country with precipitation rates well below the global average
and water resources that have become highly polluted. The scarcity of water for
consumption use and of unpolluted water bodies as recreational and environmental good
highlights the need for an economic analysis of these issues. This dissertation investigates
some economic aspects of water management in the South African context in two
distinctive parts. Part One (Chapters 2 to 5) aims to provide an understanding of urban
water demand and analyses water pricing as demand management tool. Part Two
(Chapters 6 and 7) analyses the values people attach to water resources for recreational
and environmental purposes. Quantitative methodological approaches are predominantly
used to inform an economic perspective on water demand management.
The extent of water scarcity is discussed in Chapter Two. South Africa is approaching
physical water scarcity, but many poor households do not yet have access to water and
basic sanitation facilities, i.e. there is also economic water scarcity. Given this background,
Chapter Three focuses on water demand management as part of an integrated water
management approach. The role of water prices is discussed, in particular the Increasing
Block Tariff (IBT) structure which is predominantly used in South Africa.
Chapter Four estimates the price elasticity of demand for water using household water
consumption records obtained from the City of Cape Town (CCT). A distinctive feature of
this case study is a survey undertaken to collect household information on demographic
and water-use characteristics, as water databases are severely lacking in South Africa.
The results show water demand to be mostly price inelastic, which concurs with findings
from international empirical literature. Furthermore, higher-income households are found to
be more sensitive to price changes, thus some reduction in water consumption can be
achieved by increasing marginal prices at the upper end of the IBT structure