EfD Discussion Paper,
Environment for Development, University of Gothenburg

Abstract: We calculate the first distributional statistics for municipal water supply deliveries using 14.9 million monthly billing records for a half-million households in Cape Town, South Africa, from 2014-2018. These years span a historic drought and a multi-faceted package of conservation programs that achieved a 50% city-wide drop in consumption. We find that the top 10% of households consumed 31% of water deliveries before the drought, with the Gini coefficient showing clear seasonal peaks driven by outdoor water use. Matching billing records to finegrained census data from 2011, we find that the correlation between income and water use in the winter was 0.08 but rose to 0.36 during outdoor watering seasons. This correlation declines before switching signs by the end of the drought. The city’s increasing block tariff implied that the top 10% of users generate approximately half of utility revenues. Although before the drought these top users were more likely to be high income, the composition of top water users changed during the drought. Average income of top users during the drought was 35% lower than the average income of top users before the drought. Our results suggest that Cape Town’s policy of providing a free allowance of 10.5 kL (m3) per month to qualifying indigent households helped protect many, but not all, from multiple steep tariff increases.

Keywords: drought; water pricing; distributional analysis

JEL-codes: Q25

Language: English

28 pages, June 1, 2020

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