Economic analysis of water supply cost structure in the Middle Olifants sub-basin of South Africa
Using data gathered from the National Treasury of South Africa, we examine the structure of water supply costs and tariffs of Water Service Authorities (WSAs) in the Middle Olifants sub-basin of South Africa. Using the translog cost function method, the marginal cost of water supply and economies of scale are estimated. Comparison of tariffs and marginal costs show that the estimated marginal cost is higher than the actual tariff paid by consumers. This implies that WSAs in the Middle Olifants are not charging enough to recover the costs of the water services. Thus, among other things, pricing of water at its marginal cost would partly assist in solving the cost recovery problem. Raised tariffs would in turn contribute to improved efficiency of water use. As evidenced by estimation results of returns to scale (greater than one), merger of WSAs would be economically advantageous. Hence, reversing the process of transferring water services’ authority to ‘local’ municipality level and thus up-scaling WSAs into the ‘district’ municipality level is an important policy option for improving water services efficiency in the Middle Olifants sub-basin of South Africa.
|Date of creation:||Apr 2009|
|Date of revision:|
|Contact details of provider:|| Postal: |
Fax: +49 228 / 73-5097
Web page: http://www.zef.de/
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Céline Nauges & Caroline Berg, 2008. "Economies of density, scale and scope in the water supply and sewerage sector: a study of four developing and transition economies," Journal of Regulatory Economics, Springer, vol. 34(2), pages 144-163, October.
- Corton, Maria Luisa, 2003. "Benchmarking in the Latin American water sector: the case of Peru," Utilities Policy, Elsevier, vol. 11(3), pages 133-142, September.
- Steven Renzetti, 1992. "Estimating the Structure of Industrial Water Demands: The Case of Canadian Manufacturing," Land Economics, University of Wisconsin Press, vol. 68(4), pages 396-404.
- Serge Garcia & Alban Thomas, 2001. "The Structure of Municipal Water Supply Costs: Application to a Panel of French Local Communities," Journal of Productivity Analysis, Springer, vol. 16(1), pages 5-29, July.
- Christensen, Laurits R & Jorgenson, Dale W & Lau, Lawrence J, 1973. "Transcendental Logarithmic Production Frontiers," The Review of Economics and Statistics, MIT Press, vol. 55(1), pages 28-45, February.
- Ford, J L & Warford, J J, 1969. "Cost Functions for the Water Industry," Journal of Industrial Economics, Wiley Blackwell, vol. 18(1), pages 53-63, November.
- Estache, Antonio & Rossi, Martin A., 1999. "Comparing the performance of public and private water companies in the Asia and Pacific region : what a stochastic costs frontier shows," Policy Research Working Paper Series 2152, The World Bank.
- Steven Renzetti, 1999. "Municipal Water Supply and Sewage Treatment: Costs, Prices and Distortions," Canadian Journal of Economics, Canadian Economics Association, vol. 32(3), pages 688-704, May.
- Paola Fabbri & Giovanni Fraquelli, 2000. "Costs and Structure of Technology in the Italian Water Industry," Empirica, Springer, vol. 27(1), pages 65-82, March.
- Kim, H Youn, 1987. "Economies of Scale in Multi-product Firms: An Empirical Analysis," Economica, London School of Economics and Political Science, vol. 54(214), pages 185-206, May.
When requesting a correction, please mention this item's handle: RePEc:ags:ubzefd:49926. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (AgEcon Search)
If references are entirely missing, you can add them using this form.