Technical Efficiency of Water Boards in South Africa: A Costing and Pricing Benchmarking Exercise

Ngobeni, Victor and Breitenbach, Marthinus C (2020): Technical Efficiency of Water Boards in South Africa: A Costing and Pricing Benchmarking Exercise.

Abstract

South Africa is a water-scarce country with deteriorating water resources quality, security, infrastructure investment and management. 89 per cent of households have access to water supply, but, only 64 per cent or 10.3 million households are estimated to have reliable water supply. The water sector in South Africa is cost-intensive with various monopolistic utilities. The sector is faced with weakening financial viability due to: inefficient operations coupled with inadequate investment, financing and under-pricing. As a result, cost recovery is not being achieved. In this paper, we use DEA to analyse the technical efficiency of the 9 water boards. We achieve this objective by using expenditure, water losses, sales volumes, and tariffs to model the industry’s efficiency frontiers. The study finds the mean technical efficiency scores of 73.2, 83.7, 85.8 and 92.3 per cent, in the four models respectively. The study also determined the average bulk water tariffs that should be charged in the sector, thereby establishing the basis for economic regulation.

• Item Type: MPRA Paper
• Language: English
• Keywords: Water Boards, Data Envelopment Analysis, Technical Efficiency, Tariffs
• Subjects: C - Mathematical and Quantitative Methods > C6 - Mathematical Methods ; Programming Models ; Mathematical and Simulation Modeling; C - Mathematical and Quantitative Methods > C6 - Mathematical Methods ; Programming Models ; Mathematical and Simulation Modeling > C65 - Miscellaneous Mathematical Tools; D - Microeconomics > D2 - Production and Organizations; H - Public Economics > H3 - Fiscal Policies and Behavior of Economic Agents

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