Economy at Large Water: Tariffs in Namibia

AUTHOR: Chilombo (Olga) Priscila EconomicResearcher&Statistician@ RDJ Consulting

WaterTariffsDeterminants Courtesy:RDJConsulting

It is undeniable that water is an essential resource, and its pricing plays a critical role in ensuring sustainable supply and equitable access In Namibia, a country characterised by arid conditions and scarce water resources, water tariffs are a crucial aspect of water management. As we dive into different topics surrounding Namibia’s water sector in this Edition of InFocus Namibia, it just makes sense that we seize the opportunity to also bring forth a deeper understanding of water tariff structures in Namibia, particularly for the City of Windhoek

But before we delve into the tariff issue, it is important to note that the water itself is free in Namibia. However, its extraction, treatment and supply to consumers does come at a cost As a result, consumers are required to pay a fee related to the cost of the value chain

Namibia Water Supply

In Namibia, the main actors responsible for water supply are the Namibia Water Corporation (NamWater) for bulk water supply; Government institutions such as the Department of Water Affairs and Forestry in the Ministry of Agriculture, Water and Forestry (MAWF) for rural water supply; Local and Regional Authorities for water supply, water reticulation and effluent treatment, as well as the private sector including self-suppliers such as the mining sector and commercial farmers.

NamWater for example, is operated on a cost recovery basis; therefore, the Water Utility has to recover money spent in the process of supplying water and the construction of new water infrastructure or schemes and the further maintenance of the same through tariffs. The utility’s primary objective is to supply bulk water to its customers. These include Municipalities, Commercial entities such as mines, Government institutions, Regional Councils, Town Councils, Village Councils and Industries, with the largest being mines and the City of Windhoek

Water supply schemes in Namibia are comprised of: Water sources (such as perennial rivers, dams in ephemeral rivers or boreholes); Water treatment facility to ensure its safety for potable use; Water transfer system that conveys movement of water from source to a treatment plant and further to a water distribution point such as a terminal reservoir; and water reticulation systems that convey the water from terminal reservoirs to the water consumer

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According to NamWater, laying a water pipeline for a kilometer can easily cost NAD 5 million Therefore, the construction of these facilities requires capital investment and so, a fare is charged to consumers to ensure continued fund availability for water supply and management of these systems.

Water Tariffs Structure for Windhoek

Due to different geographical, social and economic contexts, there are diverse water pricing systems and thus different water tariffs across countries and regions The dominant water tariffs are volumetric tariffs, in which water is metered This is the case of Windhoek a) A Basic Charge is a fixed monthly fee that all customers pay regardless of their water consumption, to cover the costs associated with maintaining the water infrastructure b) A Consumption Charge is a variable charge based on the volume of water consumed For the financial year 2023/2024, the City of Windhoek issued tariffs for domestic use under normal water supply conditions for its residents under Category A&B as follows:

Water tariffs in Windhoek are structured on a tiered basis, which is aimed at cost recovery, promoting water conservation and ensuring that essential water needs are affordable The tiered pricing structure is designed to reflect the increasing marginal cost of water provision and to incentivize consumers to use water more efficiently The tariff system includes a basic and consumption charges. Each is discussed below.

For the first 6 kilolitres (kℓ), meaning 0 - 6kℓ consumed per month (or 0 - 0 200 kℓ per day equivalent), a rate of N$ 24 41 is charged per kℓ This block is intended to cover essential water needs at a relatively affordable rate

For consumption ranging between 6 - 30 kℓ per month (0 201 - 1 00 kℓ per day equivalent), a rate of N$ 37 83 perkℓischarged Thistiertargetsmoderateusage

As for those consuming between 30 - 50 kℓ per month (1 001 kℓ - 1 67 kℓ per day equivalent), a rate of N$ 75 67 per kℓ is charged This tier also targets moderate usage especiallyforlarge-sizedhouseholds

Water consumption exceeding 50 kℓ per month (> 1 671 kℓ per day equivalent), a rate of N$ 151 32 per kℓ is charged This higher rate is intended to discourage excessivewateruse

Note: 1 kilolitres (kℓ) = 1 cubic meters (m³) or 1 000 litres of water.

Each of these tariffs are equivalent to that of domestic use for conditions namely: water scarcity, severe scarcity and water crisis for its residents under Category C, D and E, respectively.

FactorsInfluencingCharges/Tariffs

Other than just knowing the water tariff structure, it is necessary to understand that there are external factors that impact these costs, particularly within the City of Windhoek Thesearemainly:

Cost of Supply: The actual cost incurred in sourcing, treating, and delivering water to consumers This includes operational costs, maintenance of infrastructure, and investment in new technologies According to NamWater, one of the biggest challenges it faces is the fact that many people do not live where water is found Hence, the water utility has to construct and lay down pipelines covering long distances in order to take water to where people live, and this is a costly exercise

Water Scarcity: Windhoek is located in an arid region, and water is not always available in Tariffs are therefore set to reflect the scarcity and promote efficient use of water resources

Socio-Economic Considerations: Tariff structures are designed to be equitable, ensuring that basic water needs are affordable for all segments of the population, particularly low-income households.

Environmental Sustainability: To encourage sustainable water usage, tariffs are often structured to penalize excessive use, thereby promoting conservation

Significance of Water Tariffs

Water tariffs are critical in any economy They serve to raise revenues to cover all or part of costs of supply, ensure access across socioeconomic groups, send price signals to users about the relationship between water use and water scarcity, and ensure fairness in water service delivery And so, understanding water tariff pricing in Windhoek is essential for appreciating the City's efforts to manage its limited water resources sustainably and equitably With a total supply of 100 million m³ of water annually to other distributors and customers across the country, NamWater boasts of achieving a milestone of 85% access to clean water for the country’s population The tiered tariff structure, influenced by the cost of supply, water scarcity, socio-economic factors, and environmental considerations, therefore aims to balance affordability with the need to promoteefficientwateruse

Whatnext?

While water tariffs in Windhoek remain a vital tool for managing water resources efficiently and equitably, there is also a need to ensure that tariffs remain affordable for all socio-economic groups, especially in times of economic hardship Byaddressingsimilarissues,Windhoekcanensure the sustainable provision of water for all its residents while encouraging conservation and supporting long-term urban development

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Readings: http://documents windhoekcc org na/Content/Documents/City%20of %20Windhoek%20Water%20Tariff%20Guide pdf https://www.namwater.com.na/index.php/about-us https://061 sharepoint com/sites/PublicRelations/Shared%20Docume nts/Forms/AllItems aspx? id=%2Fsites%2FPublicRelations%2FShared%20Documents%2FTariffs &p=true&ga=1 https://wocatpedia net/wiki/Water price#Water Tariffs https://www.thinknamibia.org.na/news/the-cost-of-water