Banerjee, Sudeshna; Foster, Vivien; Ying, Yvonne; Skilling, Heather; Wodon, Quentin
Description:
Water and sanitation utilities in Africa
operate in a high-cost environment. They also have a mandate
to at least partially recover their costs of operations and
maintenance (O&M). As a result, water tariffs are higher
than in other regions of the world. The increasing block
tariff (IBT) is the most common tariff structure in Africa.
Most African utilities are able to achieve O&M cost
recovery at the highest block tariffs, but not at the
first-block tariffs, which are designed to provide
affordable water to low-volume consumers, who are often
poor. At the same time, few utilities can recover even a
small part of their capital costs, even in the highest
tariff blocks. Unfortunately, the equity objectives of the
IBT structure are not met in many countries. The subsidy to
the lowest tariff-block does not benefit the poor
exclusively, and the minimum consumption charge is often
burdensome for the poorest customers. Many poor households
cannot even afford a connection to the piped water network.
This can be a significant barrier to expansion for
utilities. Therefore, many countries have begun to subsidize
household connections. For many households, standposts
managed by utilities, donors, or private operators have
emerged as an alternative to piped water. Those managed by
utilities or that supply utility water are expected to use
the formal utility tariffs, which are kept low to make water
affordable for low-income households. The price for water
that is resold through informal channels, however, is much
more expensive than piped water.