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Who is subsidising whom? Water supply cross-subsidisation policy, practice and lessons from Zambia*

Published online by Cambridge University Press:  04 November 2010

Horman Chitonge
Horman Chitonge*
Affiliation:
Land Reform and Democracy, University of Cape Town, Rondebosch 7700, Cape Town, South Africa
*
Email: horman.chitonge@uct.ac.za
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Abstract

This paper looks at the policy and practice of cross-subsidisation in the water sector, focusing on the Zambian experience. Setting a price for water services is a sensitive and controversial issue. Pricing water services below cost recovery can threaten the sustainability of the service and human welfare in the long term, while water pricing at full cost recovery often restricts access to water services for poor households, compromising their well-being. This paper looks at one of the approaches that policy makers use in an attempt to balance the trade-offs – cross-subsidisation. Lessons from the experience of implementing the cross-subsidy policy in Zambia are identified and discussed. This paper argues that while the objectives behind the cross-subsidisation policy are clear, the results from the implementation of this policy are, at best, unclear. The Zambian experience shows that for an indirect subsidy, such as cross-subsidisation (as opposed to a direct subsidy), to generate positive results, a careful consideration of the actual context in which the policy is to be implemented must be a precondition to its implementation.

Type
Research Article
Information
The Journal of Modern African Studies , Volume 48 , Issue 4 , December 2010 , pp. 599 - 625
Copyright
Copyright © Cambridge University Press 2010

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Footnotes

*

The author would like to thank the two anonymous reviewers, participants at the 2009 World Water Week, Stockholm, members of the NRF Chair on Land Reform and Democracy in South Africa for their comments and suggestions. The author would also like to acknowledge financial support from the Melon Foundation which helped in conducting the research.

References

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