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PREM Working Paper 05-01 - Double dividends of additional water consumption charges in South Africa

Author(s) Letsoalo, A, Blignaut, J., De Wet, T., De Wit, M, Hess, S, Tol, R, Van Heerden, J
Date 2005-05-30
Theme(s) Water
Method(s) Economic Modelling
Serie(s) Working Papers


South Africa is a water-scarce country with an average rainfall of 500 mm per year. It is estimated that national water demand will exceed supply by 2025. Increasing the water supply would be environmentally, financially or politically unfeasible. Impoverished communities, especially those in rural areas, require access to water for drinking, cooking and other basic  purposes (such as agriculture). Only approximately 24 per cent of rural people have access to water on site. Unemployment in the rural areas of South Africa is estimated at about 34 per cent. This study seeks to explore ways of reducing poverty in South Africa while implementing policies that address water scarcity problems.

The South African Government is exploring ways to address water scarcity problems by introducing a water resource management charge. This will be based on the quantity of water used, and applied to sectors such as irrigated agriculture, mining and forestry. This is expected to achieve both a more efficient allocation and lower use of water, as well as helping to alleviate poverty. This paper reports on the validity of these options, providing more information for the policy-making process. This study applies a computable general-equilibrium model to analyse the double dividend of water consumption charges in South Africa. The first dividend is environmental: more water will be available as a result of an additional water charge; the second dividend is developmental: revenue generated from these charges will be recycled back into poverty alleviation programmes.


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