South Africa’s new water pricing strategy

The minister of water and sanitation published a Revised Pricing Strategy for Raw Water Use Charges on 21 June 2024. The revised pricing strategy will replace the existing 2007 strategy in 2026, when water management institutions will begin implementing it.

The broad overall objective of the pricing strategy is to promote effective and efficient management of water to support equitable and sustainable economic growth and social development in line with the overarching goals of the 2023 National Water Resource Strategy (NWRS).

AgriSA was actively involved in the consultations and commenting phase leading up to the publication of the NWRS and the revised pricing strategy. As the largest user of our country’s water resources (approximately 63%), the agricultural sector has a major interest in ensuring the reliable supply, efficient use, quality and affordability of water for food production to remain commercially viable, and for the country to be able to benefit from the social and other benefits associated with a vibrant agricultural sector.

It is well-known that South Africa is a water-scarce country. The NWRS estimates that South Africa will have a water deficit of between 1,6 billion to 2,7 billion cubic metres of water (roughly 17%) by 2030. According to a recent NoDrop Benchmarking Report[1] by the Department of Water and Sanitation (DWS),  non-revenue (i.e. unpaid for) water currently accounts for 47,4% of water that enters the water supply system.  The report also indicates that avoidable water losses are estimated to be 40,8% of water entering the supply system.

Against this backdrop, the revised pricing strategy specifically promotes water-use efficiency as one of its core objectives. It also records that the price of water should reflect its scarcity value to promote its conservation and to ensure that some water is redirected for optimal economic benefits while not harming social benefits.

Having regard for the DWS’s own figures with respect to unpaid for and wasted water, it is clear that a lot needs to be done to promote water-use efficiency in South Africa, especially if such users who do pay for water will largely be expected to foot the bill for those who do not (or cannot) do so.

The pricing strategy acknowledges this point by also including as an objective that water management systems must not become an unnecessary financial burden on water users. Doing so, however, is easier said than done, particularly in the case of commercial agriculture in which numerous variables affecting a farmer’s profitability are constantly at play. This includes the numerous production input cost factors (e.g. labour, electricity, fertiliser, equipment and debt-service costs), climatic conditions (particularly droughts, heatwaves and floods) and fluctuating commodity prices (often determined in global markets).

It should also be noted that in terms of the NWRS, the agricultural sector ranks lowest with respect to the prioritisation of the allocation of water (behind socially and ecologically reserved water; international obligations; water for poverty eradication, the improvement of livelihoods of the poor and the marginalised and uses that will contribute to greater racial and gender equity; and strategic water users like Eskom). This means that, when water restrictions need to be imposed, the agricultural sector’s water use is the first to be curtailed. The issue of assurance of agricultural water supply also comes to the fore in the context of the predicted 17% water deficit that the country is expected to have by 2030. It is a given that agricultural water use will be limited first and hardest.

Another noteworthy factor to consider is the fact that South Africa’s raw water quality is deteriorating significantly, particularly due to waste discharges from municipal water treatment works.[2] The pricing strategy will seek to address this through the long-anticipated implementation of the waste discharge charge system as well as the waste mitigation charge. The implementation of the waste discharge charge on the agricultural sector (which will be based on registered waste volumes and will be payable based on a proportional contribution to pollution in a catchment management area) has long been anticipated and is expected to be one of the most challenging components of the pricing strategy to implement.   

Of further importance is the objective to seek to provide an enabling framework for transformation and achieving the equity objectives of the NWRS as it relates to the racial and gender imbalances in access to water. The pricing strategy seeks to achieve this objective through differentiating between categories of water users and providing certain allowances for so-called “resource poor” farmers. The pricing strategy also foresees the gradual phasing out of exemptions allowed for resource poor farmers and tree growers over a period of five to 10 years.

A hard-fought (but ultimately unsuccessful) point from AgriSA was the removal from the revised pricing strategy of the permissible maximum annual increase (the so-called “cap”) on the maintenance and operations costs of the infrastructure charge component, which has not been paid for fully (previously capped at 50% increase per annum as well as a maximum of 1,5c plus producer price index (PPI) for depreciation).

The loss of the protection measure provided by the capping of maintenance and operations cost increases is a potentially significant blow to the agricultural sector. While AgriSA appreciates the necessity of paying infrastructure costs that benefit the agriculture sector, we are concerned about the effect of possible price-shocks on the sector.

The drafters of pricing strategy should, however, be commended for trying to accommodate AgriSA’s concerns in this regard by stipulating that capping will be phased out over five to 10 years and that the impact on the agricultural sector and food prices will be monitored in collaboration with the National Treasury and other government departments.

The agricultural sector’s water-use charges remain based on registered water uses (as opposed to measured water use). Specific reference is made to the way in which it will be applied in the context of natural disasters including veld fires, floods and drought, which is also welcomed.

The drafters of the pricing strategy seemingly also appreciate the potential challenges with respect to the strategy’s implementation. The government notice to the pricing strategy includes reference to the fact that an implementation guide will be prepared.

It will be vital that in the lead-up to the 2026/27 financial year raw water tariff consultations in 12 months’ time (and beyond), the agricultural sector will be able to assist the DWS in achieving rationally determined raw water tariffs in accordance with the new pricing strategy. A lot depends on ensuring affordable water to ensure the sectors’ future economic viability.  


[1] DWS No Drop Watch Report 2023 (May 2023).

[2] See DWS Blue and No Drop Reports, and The Green Drop Progress Assessment Report (2023)