South Africa’s raw water pricing strategy marks a bold step toward balancing financial sustainability with social equity. By aligning cost recovery with the right to water, the Department of Water and Sanitation (DWS) aims to build a transparent system that funds infrastructure, protects resources and secures the nation’s water future.

Deputy Minister of Water and Sanitation, David Mahlobo, says, “The revised raw water pricing strategy is a critical policy tool underpinning the financial and ecological sustainability of South Africa’s water sector. These charges were designed to fund water resource management, conservation and infrastructure, and to support the equitable and sustainable allocation of water across all sectors.”

He also emphasises the legal framework that allows the Department to implement such changes, particularly Chapter 5 of the National Water Act (NWA Act No. 36 of 1998), Sections 56 to 60, which empower the Minister to establish a pricing strategy to guide the setting of water use charges.

The revised pricing policy situates itself among broader national goals and plans, specifically the National Development Plan 2030, as well as pointed reforms within the DWS, such as the establishment of an independent economic regulator. This is, as Mahlobo says, “Intended to address long-standing concerns about transparency, consistency and accountability.”

Dr Sean Phillips, director-general of DWS, contextualises the revised plans, saying, “Water is a monopoly service, so pricing is a critical issue for ensuring financial sustainability. The raw water pricing strategy, as required under the National Water Act, provides the framework for setting water use charges on raw water abstracted from rivers, dams, and other sources.”

He clarifies that the strategy does not cover the tariffs charged by municipalities or water boards, which were governed by the Water Services Act and fall under different regulatory frameworks. As tariffs are not regulated like in the energy sector, he emphasises the importance of an independent economic regulator to ensure a fairer water system in South Africa.

Key revisions

Sizani Moshidi, Director in the Department responsible for the raw water pricing strategy, makes note that the raw water pricing strategy “specifically covers raw water abstracted from government infrastructure (such as dams and canals), and not water supplied through municipal services, which the Water Services Act governs.”

Moshidi, Phillips, and Mahlobo all point to the user-pays and polluter-pays principles as the guiding philosophy of the pricing.

The changes to pricing come with changes to water use categories, where DWS initially categorised water use under domestic and industrial. This category was split into three distinct water use cases: municipal, industrial (including mining), and strategic users.

• Municipalities account for 27% of all water used in South Africa
• Industrial users account for roughly 5% of water use.
• Strategic users, like power generators, account for 2% of water use in South Africa.

In line with broader national growth, DWS also introduces ‘non-consumptive users’ as a category for the provision of hydro and solar power generation. This specifically covers water that is not consumed and can be recovered.

The categories for pricing are laid out as follows:

• Water resource management charges: Cover the charges required to manage water resources and waste discharge within the six water management areas determined in the National Water Resource Strategy, third edition (NWRS 3) – Section 21 of NWA.
• Water resources infrastructure charges: Charges relating to the development and use of waterworks, covering charges related to planning, capital costs, operation and maintenance, depreciation, and return on assets on government water schemes. Section 56 (2)(b) of NWA.
• Waste mitigation charge: Charges which cover the cost of discharging water containing waste into a water resource or onto land. Section 56 (5) of NWA
• Water research levy: Paid into a national Water Research Fund and used by the Water Research Commission (WRC) to fund water-centred Research and Development for South Africa. Water Research Act (WRA) Section 11 and 12.
• Economic regulation charges: Charges intended to fund the activities of the Economic Regulator, introduced in the National Water Amendment Bill.
• Non-consumptive charge: Charge to recover costs associated with issuing the required water use authorisations; monitoring adherence to the conditions of the water-use authorisations; and a contribution to the operation and maintenance of the scheme to provide access to the water.

Adding context to the water resource infrastructure charges, Moshidi says: “The Pricing strategy considers the full lifecycle of the infrastructure and makes provision for the recovery of associated costs.” Additionally, section 56 2(b) NWA provides that the pricing strategy may contain a strategy for setting water use charges for funding water resource development and use of waterworks, including:

• the costs of investing and planning
• the costs of design and construction
• pre-financing of development
• the costs of operations and maintenance
• a return on assets
• the costs of water distribution.

Implementation

This revised strategy is not ‘shock treatment’ and DWS emphasises that this will be done as a ‘phased’ roll out. The removal of price caps, originally introduced during the apartheid era to boost agriculture but now considered outdated, will gradually be phased out over a ten-year period.

In addition, there will be a waiver of charges for qualifying resource-poor farmers and foresters from the registration of water use, including charges from Water Use Authorities (WUAs). These charges will also be phased out over ten years, with qualifying users expected to pay 100% of their charges by 2036. Measurements of water use will inform resource and water research levy charges, with adjustments made to ensure assurance of supply.

DWS will manage funds from depreciation and return on asset charges in a dedicated reserve fund, prioritising asset refurbishment in line with the department’s integrated water resource risk management systems. Once established, the reserve fund will be transferred to the National Water Resources Infrastructure Branch. Charges will be set for three-year intervals, with annual reviews to ensure the mechanism functions effectively; adjustments will be made at the end of each three-year cycle, with September 15th marking the cutoff date.

The Minister will approve these charges following regulator review and Portfolio Committee input. During drought conditions, a system of tiered waivers will apply depending on water availability, with Treasury covering revenue shortfalls in severe cases. WUAs, individual users, or Catchment Management Agencies may approach the Department with a motivation for implementing such drought measures. When water availability drops below 50%, the Department will seek financial support from the National Treasury to recover income shortfalls from the fiscus.

This revised water pricing strategy aims to boost infrastructure, recover costs, and fund research while maintaining the mandate that water is a human right.