Preferences for domestic water services in the Middle Olifants sub-basin of South Africa

Abstract

Using household survey data, this study investigates preferences for domestic water services in the Middle Olifants sub-basin of South Africa. Water is a relatively scarce resource in South Africa that is distributed unevenly both geographically and seasonally as well as sociopolitically. For a water management addressing the policy objectives of efficiency in use, equity in access and benefits and long-term sustainability, economic valuation of the different water uses is required. In order to detect households' preferences, a choice experiment of the various water services was conducted. Results suggested the presence of preference heterogeneity and therefore, a latent class model was applied, dividing households into homogeneous groups according to their preferences. Four distinct groups of households could be identified which differ significantly in terms of their socio-economic characteristics, their attitudes toward pricing of water and their satisfaction with current water service levels. Willingness to pay (WTP) estimates of different water service characteristics in all groups indicate that households are willing to pay higher prices for a better and more reliable water services provision. But the amount households are willing to pay differs among the groups. This information is helpful for policy-makers to enable the design of water services in the Middle Olifants according to preferences of local households. Besides, WTP estimation can provide a basis for setting water tariffs.