National Water Act, 1998 (Act No. 36 of 1998)

A Pricing Strategy For Raw Water Use Charges

6. Phasing in the New Approach
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6.1 Introduction

The starting point for the phasing in of the new pricing strategy is the recognition that there are fundamental differences between water use charges for a) funding water resource management, b) funding water resource development and use of waterworks, and c) achieving the equitable and efficient allocation of water.

 

It is important to note that while both water resource management and water resource development and use of waterworks charges reflect financial costs, there is a logical difference between the two which requires that they be separated. Water resource development and use of waterworks charges are only levied on the users of specific government water schemes or systems, and schemes funded by water management institutions and are based on the costs associated with those schemes. Water resource management charges, on the other hand, relate to all water utilised within the water management area and should, therefore, be charged to all water users, irrespective of whether water is provided from a water scheme or not.

 

Finally, when introduced, a charge for achieving the equitable and efficient allocation of water would reflect not a financial cost, but rather an economic one, the objective of which would be to provide incentives for water to be allocated to those who value it highly. Like the water resource management charge, such a charge would be area-specific and would apply in water-stressed areas.

 

It is clear from the above that a fundamental principle underlying the proposed pricing strategy is that eventually it should apply to all water, not just that which is currently supplied from government water schemes.

 

6.2 Phasing in the Various Charges

The phasing in of the proposed water pricing strategy will have to be structured so as to follow the phased implementation of the National Water Act, 1998. The process for phasing in can be summarised as follows:

 

Water Resource Management Charges

 

The introduction of water resource management charges will have to proceed more slowly than the introduction of water resource development and use of waterworks charges (see below), as the registration of water use in water management areas is a prerequisite for its full implementation. The current situation is that catchment management charges relating to the water resource management functions of water conservation (invasive plant and water weeds removal) and water utilisation (abstraction, storage and afforestation permit control) have already been introduced for water users at certain Government water schemes. Registration will be prioritised in the water management areas containing the catchments of those schemes so that all water users can be charged in an equitable way.

 

Water resource management charges will be introduced as soon as the greatest part of existing water use in priority water management areas has been registered.

 

Water Resource Development and Use of Waterworks Charges

 

The phasing in of full financial cost recovery for water sold from government schemes can be introduced more rapidly, as the users thereof are easily identifiable. This will have to be done bearing in mind standing agreements with specific user groups and adaptability constraints (See Part 7 below).

 

Charges for Achieving the Equitable and Efficient Allocation of Water

 

As already mentioned above, charges relating to the funding of water resource management and water resource development and use of waterworks will make a significant contribution towards achieving the equitable and efficient allocation of water. On Government water schemes, the return on assets charge will be used as an economic incentive to conserve water, by introducing stepped tariff structures. Thus, the introduction of additional economic incentives will not feature soon. The reason for this is that it is acknowledged that it would be premature to introduce economic pricing before the effect of full financial costing of water on resource utilisation has been evaluated.

 

The introduction of a charge to achieve the equitable and efficient allocation of water will proceed as follows:

 

•In water-stressed areas where compulsory licensing has been accomplished, any remaining water that can be allocated, may be priced through the public auction process described in 5.3.3.

 

•The setting of an economic charge in an administrative way, based on the opportunity cost of water, would only be considered from the date when the period of compulsory licenses in water management areas has expired.

 

To promote the beneficial use of water, DWAF will also regulate the trading of water use between individuals.