TCS Daily

Pipe Dreams for the Poor

By Roger Bate - March 4, 2002 12:00 AM

SOUTH AFRICA -- Many arid countries of the world are running out of water; the result will be wars - and the poor will suffer most. For the past decade these concerns have been shouted from the world's largest newspapers, reporting alarming forecasts periodically issued by groups ranging from the World Watch Institute to the United Nations Environment Programme.

Much media attention has focussed on geopolitical hotspots like Israel and Palestine, Turkey and Iraq, and governments have been urged, and have pledged, to deal with the problem. Despite this, governments have been able to offer few practical solutions. That is because government is primarily the cause of water misallocation. By trying to solve a problem of their own making, they have centralized water control and made things worse.

The best solution for water misallocation is to get government out of the day-to-day allocation decision-making process. Governments usually will have a significant role in making the initial allocation of water and create the legal framework to allow for water quotas to be traded, but then they must do something that all politicians and bureaucrats find hard to do - stay out of the way.

For example, the poor in South Africa often have no access to clean water with disastrous consequences such as the cholera outbreak in Kwa Zulu Natal Province in 2000. Poor South Africans, like their peers in countries from Argentina to India, have dangerously poor quality supplies, and what's more, they pay more for it. According to the World Bank, buying water from street vendors and tank trucks is often far more expensive than paying for pumped supplies.

One country that has led the way in reorganising allocation of water to the poor is Chile. Under the communist Allende regime Chile nationalized water in 1966. But when Pinochet came to power, one of the few really good things he did was to allocate rights to individual farmers, businesses and municipalities, and allowed each group to trade their quotas. In effect, the Chilean government allocated rights and then got out of the way to ensure that the higher valued uses (which usually are domestic requirements) received adequate water. In 1970 only 27% of rural and 63% of urban dwellers received potable water. By the mid-90s the respective percentages were 94% and 99%. These figures are better than any other mid-income developing country in the world.

The reason for Chile's success is simple - water markets do not ensure equitable allocation, but they do ensure efficient use of the resource. This means that government is left free to do what it has to do, make the initial allocation decision (and subsequent minor alterations based on climatic changes such as rainfall levels and aquifer recharge) and regulate the market. The result in Chile was that municipalities had more water available with greater security and hence could connect more people to supply. Previously, agricultural interests had hogged nearly all the water, denying the poor the access that was their right under the law.

Unfortunately, South Africa (and many other developing countries) is today where Chile was in 1981 - it still has too much water going to mostly white agricultural interests. Since 1994, and the first black-led government, there has been little redress for the urban and rural poor and black farming interests, even though by law the poor should receive adequate supplies.

If the government allowed existing users to sell their water-use licences to municipalities and simultaneously removed all subsidies to farming (as occurred in Chile), some farmers would inevitably sell their rights and quit farming, opening up possibilities for black farmers, whose efforts could be subsidized for a period, and the poor. Chile is now the world's largest exporter of winter fruit to the northern hemisphere, Southern African farmers could out-compete them, but not while their industry is heavily protected and they grow water-intensive but low-value crops, like sugar.

The South African Department of Water Affairs must take up the challenge and devolve power to the water catchments and water users by allocating the rights the government nationalized in 1998. DWAF simply doesn't have the capacity to work out how water should be allocated amongst all users over time. That should be left to markets to decide.

Furthermore, regardless of rhetoric to the contrary, DWAF inevitably favours the status quo - which means white farmers. DWAF must allocate rights, provide an overt system of redress for apartheid, and then step back, and regulate private transactions to ensure minimum environmental harm and fair play. Without doing so the well-known aspiration of 'lifeline' access by the poor is nothing but a pipe dream. A pipe dream without water.

Dr. Roger Bate is co-author of the recently published book: "The Cost of Free Water - The Global Problem of Water Misallocation and the Case of South Africa."


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