Double Dividends of Additional Water Consumption Charges in South Africa

Posted: 18 Nov 2005

See all articles by Anthony Letsoalo

Anthony Letsoalo

Council for Scientific and Industrial Research (CSIR)

James Blignaut

University of Pretoria - Department of Economics

Theunis Jacobus de Wet

University of Pretoria - Department of Economics

Martin De Wit

Stellenbosch University; Council for Scientific and Industrial Research (CSIR)

Sebastiaan Hess

VU University Amsterdam - Institute for Environmental Studies (IVM)

Richard S. J. Tol

VU University Amsterdam - Institute for Environmental Studies (IVM); Carnegie Mellon University - Center for Integrated Study of the Human Dimensions of Global Change; University of Hamburg - Centre for Marine and Climate Research (ZMK); Princeton University

Jan van Heerden

University of Pretoria - Department of Economics

Date Written: March 4, 2005

Abstract

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. Un-employment 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 programs.

Keywords: Water scarcity, water charges, double dividend, poverty alleviation, computable general equilibrium model

JEL Classification: D58, H21, Q25, O13

Suggested Citation

Letsoalo, Anthony and Blignaut, James and de Wet, Theunis Jacobus and De Wit, Martin and Hess, Sebastiaan and Tol, Richard S. J. and van Heerden, Jan, Double Dividends of Additional Water Consumption Charges in South Africa (March 4, 2005). PREM Working Paper No. 05-01, Available at SSRN: https://ssrn.com/abstract=849186

Anthony Letsoalo (Contact Author)

Council for Scientific and Industrial Research (CSIR) ( email )

Meiring Naude Road
Brummeria
Pretoria 0001
South Africa

James Blignaut

University of Pretoria - Department of Economics ( email )

Physical Address Economic and Management Sciences
Pretoria, Gauteng 0002
South Africa

Theunis Jacobus De Wet

University of Pretoria - Department of Economics ( email )

Lynnwood Road
Hillcrest
Pretoria, 0002
South Africa

Martin De Wit

Stellenbosch University ( email )

Private Bag X1
Stellenbosch, Western Cape 7602
South Africa

Council for Scientific and Industrial Research (CSIR) ( email )

Meiring Naude Road
Brummeria
Pretoria 0001
South Africa

Sebastiaan Hess

VU University Amsterdam - Institute for Environmental Studies (IVM) ( email )

De Boelelaan 1115
Amsterdam, 1081 HV
Netherlands
+31 20 5989550 (Phone)

HOME PAGE: http://www.ivm.falw.vu.nl/People/index.cfm/home_file.cfm/fileid/D9EF4567-29E3-49B2-97667C99A5728DB1/

Richard S. J. Tol

VU University Amsterdam - Institute for Environmental Studies (IVM) ( email )

De Boelelaan 1115
Amsterdam, 1081 HV
Netherlands
+31 20 444 9555 (Phone)
+31 20 444 9553 (Fax)

Carnegie Mellon University - Center for Integrated Study of the Human Dimensions of Global Change

Pittsburgh, PA 15213-3890
United States

University of Hamburg - Centre for Marine and Climate Research (ZMK)

Troplowitzstrasse 7
D-22529 Hamburg
Germany

Princeton University ( email )

22 Chambers Street
Princeton, NJ 08544-0708
United States

Jan Van Heerden

University of Pretoria - Department of Economics ( email )

Physical Address Economic and Management Sciences
Pretoria, Gauteng 0002
South Africa

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