Institutional and Socio-Economic Review of the Use/Application of Electronic Prepayment Meter Technology in the Provision of Water Supply Services to Urban and Peri-Urban Areas
Report No 1206/1/04
Nov 2004

EXECUTIVE SUMMARY

In many municipalities prepayment water meter technology has become a prominent instrument of water management contributing, with other measures, to the sustainability of water provision. This study aims to provide an understanding of the social and institutional context in which the technology fails or succeeds. This understanding is derived from an examination of the available literature, the analysis of surveys and by examining case studies.

The primary objective of the study was to understand how the technology could best be used to ensure sustainable water provision by local authorities. Key objectives were to determine how the changing institutional environment impacted on the uptake of the technology and, similarly, how socio-economic contexts affected its adoption.

The project methodology included:

• Desktop research for a literature study.
• Discussions with relevant stakeholders like DWAF, SALGA, DPLG to gain an understanding of the environment in which water service providers operated.
• Conducting a national survey of water service providers (the NPS).
• Analysing returns from the National Postal Survey (NPS) in combination with data from the Labour Force Survey (LFS) and the DWAF WSSP database
• Analysing eight case studies.

Four threads serve to provide continuity and focus to the report :

• effective water services delivery
• consumer benefits
• institutional arrangements
• public participation.

In the literature study, it is pointed out that South Africa is a world leader in the development and application of prepayment water meters and the related technology. This is reflected in South African dominance of the literature. The Internet revealed a vast number of references to Chinese suppliers of prepayment water meters but little could be found on the social, institutional and economic context in which they employ the technology. The paucity of information on the Chinese experience is undoubtedly due to language issues.

Authors on prepayment technology tend to be either proselytes or detractors with few authors offering “objective assessment. Critic’s viewpoints were generally related to their distaste of privatisation and globalisation. The negative impact these forces have on human rights, and on the poor in particular informed much of their criticisms. South African critics emphasise the vulnerability of the poor and women as an argument against the use of prepayment water meters. Unfortunately these viewpoints were generally articulated before the introduction of the Free Basic Water policy. Even critics writing after the introduction of FBW do not adequately consider the impact of the policy.

Advocates of the technology are often found from amongst suppliers of the instruments and from the local authorities using it. Countries where these meters have been used or are being considered now include Nigeria, Tanzania, Egypt, Curaçao, Namibia and Brazil. The writing of advocates accentuate the technical aspects of the technology at the cost of social and institutional aspects emphasised by critics. Rabe’s research in Gauteng is highlighted as a strong contribution to the debate by a water service provider. His positive view of the technology is partly a function of assessing its impact in less in terms of income generation than it terms of minimising waste.

The National Postal Survey revealed a number of key insights including:

• More than half of all South African households fall under a “billed” system. This means that many poor households have to cover the high transaction costs associated with that system.
• When compared to consumers who pay for past consumption those using prepayment meters are charged significantly less for each litre they consume.
• Service providers believed that the vast majority of consumers were positive or indifferent to prepayment water technology.
• household consumption is price sensitive and consumption varies loosely with the price charged.
• The implementation of prepayment meters does not per se reduce water consumption of households.
• Although there has been a tendency to install prepayment meters in the dwellings of the poor one third of users had a household income of more than R1 200 per month.

The NPS was biased as municipalities using prepayment meters were less likely to respond than those that were not using the technology. The anticipated uptake of the technology derived from the survey should be seen against this background. After neutralising bias in the responses received a probabilistic model of uptake predicted that:

• · The number of prepayment meters would probably increase by 23% in the following year
• · Most municipalities that intend implementing them would have less than 100 meters in place one year hence.

The Labour Force Survey (LFS) conducted in 2001 by Statistics South Africa (SSA) covered a variety of attitudes and perceptions. This survey proved useful, particularly to identify response bias and assessing the impact of prepayment meters.

The conceptual framework adopted in this report centres on “tariff regimes” under which benefits are associated with particular combinations of costs and sanctions. Five tariff regimes are distinguished: billed, flat rate, prepayment, regulated and communal sources. These are discussed and compared in terms of prevalence, cost and their impact on consumption level. The LFS established that:

• In 2001 only 2,4 percent of all households who had piped water to their dwellings or stands used prepayment meters. These meters tended to be highly concentrated in certain areas, viz all meters captured by the survey were in eight percent of the enumerator areas sampled.
• Consumption levels vary according to urban-rural localities with urban consumers using about three times more water per household

The information from the NPS and LFS was combined with data on water charges to unpick the attitudes and perceptions of current users. Aspects considered include perceptions of satisfaction with the technology in general and with cost effectiveness and technical reliability in particular. Prepayment meters in private houses, instead of communal taps, were viewed more critically by their users.

Among service providers there was a strong correlation between technical reliability and general satisfaction with the technology. The role of on-going support for the technology was highlighted by the correlation between support levels and high satisfaction levels regarding the meters in general and their technical reliability in particular. Contrary to popular perception vandalism was not cited by service providers as a particularly serious problem. Somewhat surprisingly service providers indicated that the FBW policy would have a minor impact on anticipated uptake of the technology.

Finally, case studies were conducted in municipalities selected to ensure a cross section of experiences with the technology. The eight municipalities selected were:

• Beaufort West (300) in the Western Cape
• Kannaland (1 400) in the Western Cape
• Swartland (1 500) in the Western Cape
• Letsemeng (1 000) in the Free State
• Mogale City (16 500) in Gauteng
• Nkomazi (1 374) in Mpumalanga
• Polokwane (1 100) in Limpopo
• Umzimvubu (500) in Eastern Cape.

The highest number of prepayment meters in use at any stage appears in brackets behind the name of each municipality. The studies examined the experiences of service providers with the technology. The most salient findings were:

• The drive to introduce prepayment water technology was motivated by a need to combat institutionalisation of non-payment.
• Planning, installation and operation were characterised by many technical problems. However instrument suppliers were initially willing to provide strong technical support.
• In many cases there was an initial lack of public participation. This situation has since improved.

The Free Basic Water policy has had an important influence on municipalities’ installing the technology. The FBW, inter alia, altered their perceptions as to

• where the technology was most appropriately placed.
• Expected future trends were highly varied. Some municipalities planned to expand coverage, while others planned to replace their prepayment meters with conventional ones. The last were generally motivated by high maintenance costs or the unreliability of the instruments.

Recommendations

It is generally concluded that prepayment water meter technology has a valuable role to play in sustainable water service delivery. The major recommendations arising from the study are:

• Water policy (including free basic water provision and the use of equitable share grant) should be packaged in a manner that enables municipalities to better interpret and apply it.
• Municipal structures and their agents need assistance to understand and address social conflicts relating to service payment. The impact of indigent policy and the insights gained from case studies need to be more widely shared.
• A working partnership between stakeholders such as DWAF, SALGA, DPLG as well as WRC, must be generated. This partnership should be used to ensure that policy measures and interventions blend. The resulting shared understanding and application of policy should be communicated to municipalities in an accessible and easily understood manner.
• Municipal water service providers should be equipped to see the differences between community resistance to payment and the means by which payment is effected. Similarly consumers have to be informed that free-riding is no longer an option – irrespective of the means by which consumers are called to account.
• Municipal structures must actively educate constituencies as to the implications of “free-riding”. This education should highlight the cost of “free-riding” in terms of reduced service delivery in other service sectors. Political representatives should play a more prominent role in articulating the grievances of their constituencies while promoting the decisions of the elected local government.
• SABS certification of prepayment water meter units should be introduced.

Issues for further research are also identified, including:

1. An examination of the potential of “low level technology” in reducing the cost of water to very low-income communities.
2. An examination of the impact on households and service providers of an increase in the FBW allocation.
3. Improved estimation of the full transaction costs associated with fixed rates and “traditional” billing
4. Estimating the impact of HIV/AIDS on the water demand and the management of water service delivery by municipalities
5. The Chinese experience should be examined by, inter alia, site visits which may further our understanding of the social and institutional aspects of the technology.