Sources of successful cost recovery for water: Evidence from a national survey of South African municipalities

Abstract

This article analyses variation in municipal cost recovery for water services in South Africa. It uses original data from a national survey of municipalities, conducted in late 2000. A multivariate causal model is estimated to measure the effects of social and institutional context, service infrastructure, and billing and payment practices. The analysis shows that cost-recovery outcomes vary widely and are quite sensitive to factors that can be influenced by municipal decision-makers. Substantive implications for a typical South African municipality are clarified through simulations of the effects of upgrading infrastructure, introducing various cost-recovery measures, and extending basic services to poor households. As profound changes in the institutional and policy environment--including municipal restructuring (demarcation) and the 'free basic water' policy--force municipalities to review their cost-recovery strategies, the article offers insights into how to achieve the best possible outcomes.