Water is a public good; water is the common property of all; access to water is a fundamental human right; no one has the right to profit from water. These are some of the commonly held beliefs of those who oppose any private water ownership or private provision of water services. Yet constantly repeating these water mantras will not magically improve the access the people have to clean water; in fact it will do quite the opposite and encourage the misuse and waste of a precious resource.
The one fundamental problem with declaring anything a public good or common property is that it provides no incentive to any individual to conserve that good. Well intended water conservation campaigns may lead to some improved water use at the margin, but unfortunately do not address the fundamental problem. Human beings the world over respond to incentives and where those incentives encourage the wasteful use of water, no amount of pleading from water conservation groups will change that behaviour. The only way to use water more efficiently is to ensure that it is privately owned and its use is monitored and paid for.
South Africa has a long and interesting history of water allocation and use. For most of our 300 year history, raw, or bulk, water was allocated to users on a political rather than on an economic basis. At varying points in our history, either English speaking or Afrikaans farmers were allocated most of the countrys water resources. Unsurprisingly, for the most part, blacks were out of favour when it came to accessing water for agriculture or anything else for that matter.
With around half of our water resources used in agriculture, addressing water use by farmers is key to improving access to clean water and sanitation for South Africas poor who are subjected to dirty and dangerous water supplies. The post-apartheid government had its work cut out for it in attempting to correct the wrongs of the past. The 1998 National Water Act is a rather mixed bag of legislation; it improves control over water by setting up local Water User Associations (WUAs) which empowers local water users and reduces Pretorias influence. But the Act also nationalises water resources and forces water users to apply for temporary water use licences. This increases the discretionary power of bureaucrats to decide who should and shouldnt use water repeating the errors of the past.
Nevertheless, in several catchments in South Africa, water users are trading water rights. Those that have water rights and either dont need them, or cant put them to a high value use, are selling those rights to other users who can use the water more efficiently and profitably. By allowing the market to allocate water, the resource is used more efficiently, which is not only good for the economy but for the environment and people as well.
The idea of water markets fills some people with horror as they imagine greedy speculators trading in water, while poor people are priced out of the water market, left to drink untreated and unhealthy water from streams. The reality is somewhat different. When Chile privatised its water resources and allowed water trading, municipalities could enter the market and buy up water from farmers so that they could improve supplies to their population. The upshot is that in a few short years, 99% of the urban poor and 94% of the rural poor had access to clean water. To a limited extent this is happening in South Africa, but the Department of Water Affairs (DWAF) has tied potential trades up in red tape and has not approved any trades since February. The government should be applauded for allowing trades to take place, but by dragging its bureaucratic feet it is now harming agriculture and limiting access to water for the poor. In addition to sorting out the red tape issues, DWAF should urgently establish greater certainty over water rights so that trades can be done more efficiently and fairly. It is difficult and risky to attempt to trade something if the buyer thinks government will at some stage remove the right he wants to buy.
If some people accept the benefits of trading raw, untreated water, they often balk at the idea of a private company treating and providing water and sanitation services in towns. The assumption that the state is better placed to deliver water is false. In almost every instance, the state is less efficient at supplying services than the private sector, and those costs are borne by all taxpayers. In the past, most state-controlled water schemes in most poor countries have favoured the urban elite, while the poor have to pay exorbitant sums to water sellers. Yet supplying safe water to the millions who need it is often beyond the budget of the state or the largesse of charities.
The private sector, however, can play a crucial role by investing in infrastructure and delivering safe, potable water. Examples are often cited of instances where private water supply has gone wrong, such as in Cochabamba, Bolivia. Here the private water supplier hiked prices and didnt deliver the goods, leading to violent street riots. Yet if the proper institutions are in place that can enforce contracts and ensure that a supplier delivers, then the private supply of water has a far better chance of working just like the private supply of all other goods and services. And if one is worried about the very poor not having access to water (and we should be) then the government can and should provide vouchers that can be exchanged with a private supplier for clean water and sanitation services.
Those that campaign against private water ownership and supply on the grounds that somehow water is different should think again. It is precisely because water has not been treated like other goods that it is used inefficiently in agriculture and why poor people still lack safe access to the resource. Food, like water, is essential for human survival, yet no one seriously considers that the only way to reduce hunger is for the state to seize control of agriculture and then manufacture and distribute all food. Countless communist countries have done this and it only led to mass starvation. It is high time we recognise that markets and the private sector are the friend of the poor and an essential tool for providing water to those who need it.
Author: Richard Tren is co-author of The Cost of Free Water, published by the Free Market Foundation. This article may be republished without prior consent but with acknowledgement to the author. The views expressed in the article are the authors and are not necessarily shared by the members of the Free Market Foundation.
FMF Feature Article\25 November 2003
Publish date: 27 November 2003
The views expressed in the article are the author’s and are not necessarily shared by the members of the Foundation.