African Water Development Report 2006 - United Nations Economic ...

increase cost recovery for water systems. In termsof irrigation prices, the fixed charge (per litre persecond per hectare) decreased from $US 3040 in1985, to $US 48 in 1995. In terms of volumetriccharges, it remained the same, at $US 0.02-0.03in 1995. In Botswana, in 1994/1995, 44 per centof the total operational and maintenance costs ofwater supply were recovered, compared to 33 percent recovery in 1988/1989. These examples helpto show that in the absence of working marketsfor water and in the presence of growing conflictsover water use, there is a pressing need tounderstand the underlying economics of waterdemand and value in various economic sectors,especially in the context of Africa (BorgoyaryM., 2002).In Africa, where access to safe drinking water isstill low, especially in the rural areas, the questionof water being an economic good is topicalsince it involves the relevant issue of abilityand willingness to pay. However, since the 1990s,it has become obvious that it will be difficult tomobilize the financial, engineering and physicalresources required to supply clean water to thosewithout it if water is not used more efficientlyand if national water priorities and policies arenot rethought Jack Moss el al, (2003). Moreover,there is an urgent need to update distributionsystems in order to retrieve much needed waterfrom the very high level of unaccounted-for-water.All such actions require large sums of moneywhich are not readily available in many Africancountries. The potential benefit of the principle ofeconomic good is that increasing economic efficiencymeans increasing the size of the economic“pie” ( Jack Moss el al, 2003). That being the case,many countries now recognize water pricing as astrategy for releasing capital for investment andreducing waste (Box 12.2).In Libya, water is provided almost free of chargedue to the fact that municipalities are unable tosupply water of acceptable quality and pressure.By Law, however, municipal water is meteredand charged using a rising tariff block system.The tariff is not intended to recover the investmentcost for the water supply system, but ratherto minimize wastage and partly compensate forthe operation and maintenance costs. A new tariffsystem has recently been introduced, based onO&M cost recovery and for agricultural, industrialand municipal water uses. The billing systemis still irregular and sometimes non-existent,which implies that water will continue to be afree commodity provided by the State for someyears to come. No charges are imposed on irrigationwater, as water is extracted through privatelyconstructed wells. At present, farmers only payfor the cost of energy used for the productionof water, which is also subsidized (AWDR NationalReport, 2005).In the Sudan, raw water is treated as a substanceand a free commodity. Water pricing is thereforebased on the cost of services to reach the users.These services are estimated using many variablessuch as: availability, transferability, quantity andquality. In large-scale irrigated schemes managedby the public sector, water rates are based on costrecovery. The private sector uses the water sourcefree and the operation and maintenance costsare covered by individuals or cooperatives. Waterprices for irrigation, for example, are basedon cultivated area and not on actual quantity ofwater used which depends on type of crop. Onehectare of cotton costs more than one hectare ofgroundnut or sorghum (almost twice), as per thelength of growing season which consequentlydetermines the number of watering. In 2003,the cost of irrigating one hectare of cotton wasabout US$50, while for sorghum, it was US$.25It is worth mentioning that these costs coverthe irrigation services from source to farm level.The domestic water supply rates vary widely betweenurban and rural areas. Urban localities arecategorized as first class, second class and thirdclass. Water rates are based on a flat rate systemin each category. For example, in Khartoum thedrinking water supply rates for the first class areasare about US$ 16 per month and the thirdclass areas about US$ 8. These water rates are setto cover operation, maintenance and the systemupkeep. In the rural areas domestic water sup-VALUING WATER285