Project on the Raw Water Pricing Strategy, Financing Models for the Water Sector and the Establishment of an Economic Regulator

Since the advent of democracy in 1994, there have been on-going efforts to reform and realign the water value chain so that it can efficiently achieve government’s objectives. These objectives include ensuring equitable access to water and sanitation, the sustainable use of water for optimum social and economic benefit, and ensuring the sustainability of water resources and water services delivery, as outlined in the National Water Resources Strategy (NWRS) of 2004 and the Strategic Framework for Water Services of 2003.

As part of this process, DWS is embarking on a project looking at pricing, financing and economic regulation reforms in the water sector. The project will review the raw water pricing strategy, develop infrastructure funding models and recommend an appropriate model and institutional arrangements for an economic regulator for water. It is generally agreed that pricing and economic regulation play a key role in infrastructure service provision by assuring necessary investments to support socio-economic growth and ensuring that services are widely available and accessible and priced at levels supportive of current and future needs.

The project will contribute to the following outcomes:

• The revision of the Raw Water Pricing Strategy to ensure equitable and appropriate raw water tariffs that will enable sustainable operation and management of raw water infrastructure and will adequately fund catchment management
• Funding/financing models for water resources infrastructure
• The establishment of an economic regulator for the entire water value chain

The project strategic in nature and will enable DWS to have good policies on pricing of water, cost reflective tariffs for the entire water value chain in South Africa and a good funding framework for infrastructure.

The project is divided into 3 work-streams, each to be led by DWS together with different institutions to provide support as below: