Estimating water demand for domestic use in rural South Africa in the absence of price information

Abstract

The paper applies the travel cost method (TCM) to estimate the value that rural households in the Steelpoort sub-basin of South Africa place on river and collective tap water. While the TCM calculations are based on the opportunity cost of the time household members spend on water collection, the resulting welfare values are close in magnitude to the estimates obtained using a contingent valuation method (CVM) on the same sample. The paper shows that in the absence of price data, the TCM provides satisfactory estimates of benefits where direct estimation of demand elasticity would otherwise be impossible. According to both methods, households consuming river water attribute higher value to the resource than collective tap users. The income elasticity of the trip generating function is much higher than that of the opportunity cost of time (price), implying that household's water use behaviour would be more responsive to factors affecting household income than to price incentives. Comparing the estimated values with actual operating and maintenance cost of water provision in the study area suggests that policies promoting cost-covering water tariffs have a potential to succeed.