TCS Daily

Water Is Not "Different"

By Richard Tren - December 9, 2003 12:00 AM

"Water must be declared and understood for all time to be the common property of all. No one has the right to appropriate it for profit." These are the words of the Canadian water activist Maude Barlow, but they could have been said by any number of leftist commentators and organisations that oppose any private water ownership or private provision of water services. Yet constantly repeating these water mantras is not going to 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 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 water was allocated to users on a political basis, rather than an economic basis. At varying points in our history, either English speaking or Afrikaans farmers were allocated most of the country's 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.


In Africa around half of the water resources are used in agriculture. Addressing the way in which farmers use water is key to improving access to clean water and sanitation for South Africa's 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). This move empowers local water users and reduces Pretoria's 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 shouldn't 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 don't need them or can't 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 resource 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 been tying up potential trades 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 give 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 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 where private water supply has gone wrong, such as in Cochabamba, Bolivia. Here the private water supplier hiked prices and didn't deliver the goods, leading to violent street riots. Yet if the proper institutions of the free market, such as the rule of law, 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. Of course the supply of water services is a natural monopoly and so a regulator could ensure that it doesn't abuse its position while still making a profit. 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 been treated unlike 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 lead 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.


Richard Tren is a frequent TCS contributor and co-author of The Cost of Free Water, published by the Free Market Foundation.


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