The price-setting process and a potential role for economic regulation in a water scarce developing country

Abstract

Setting appropriate prices, as one of the most versatile tools of demand management, is increasingly being promoted to send out the proper signal that water is a valuable resource and should be used accordingly, especially where resources are limited. Setting prices is also critical to assure affordable access by lower-income households. The price-setting process, within the government's existing legal framework, given the challenge of growing water scarcity and skewed income distribution in Windhoek (capital of Namibia), is explored in this paper. Based on fieldwork undertaken in Namibia, the paper considers policies relevant to the price-setting process; the cost of service provision; affordability of services and perceptions about the benefits of a future economic regulatory system. The researchers found that the price-setting process, although successful relative to many lower-income countries, could be improved with respect to transparency of decision-making and clarity regarding the incorporation of the interests and needs of various stakeholders. Respondents saw the need for a more autonomous level of economic regulation in order to ensure sustainability of improved urban water and sanitation services for all in Namibia.