It has been argued (see for example the book Beyond Domestic) that productive uses of ‘domestic’ water can lead to improved financial sustainability. Household water users may be more likely to be able and willing to pay water charges when they are cultivating gardens or keeping some livestock as well as consuming water for normal domestic purposes.

In March 2005, IRC undertook a study to assess the financial sustainability of water supply systems for five municipal Autonomous Water and Sanitation Companies (SAAS) on Santiago Island in Cape Verde. Some wellfields here are used to supply water for domestic consumption as well as water for irrigated agriculture around the towns, and the water companies manage supply for both users. But the water companies do not recover enough water fees to cover costs and currently they face serious problems of financial sustainability. The main reason for this situation is a subsidised tariff for irrigation water, which is much lower than production costs that the water companies have to bear. Furthermore the water companies face an additional problem: decentralised government institutions have large outstanding debts owing to the water companies.

The tariffs for irrigation are maximum CVE15/m3 (USD 0.17) for traditional irrigation and CVE8/m3 (USD 0.09) for farmers using drip irrigation. These rates are established by the Ministry of Agriculture as an incentive for agricultural production and are beyond the direct control of the water companies. However, the average cost of production per m3 to the water companies is much higher: between CVE37/m3 and CVE110/m3 (0.42 - 1.24 USD respectively). This difference is paid for by drinking water consumers. The burden falls disproportionately on those who pay the highest prices per m3: poor consumers who rely upon water provided by tankers and fountains. Effectively, the poorest in the towns are subsidising the low price of water for irrigation. But the water companies do not have enough drinking water consumers to cover the “hole” in their accounts created by the sale of water for irrigation. Each month, the financial deficit of the water companies grows worse. To make the situation more complex, a poverty analysis shows that the small towns with the highest percentage of extreme poverty (where income is less than CVE 2.403 (27 USD) per capita per month), have the largest irrigation areas. In some cases, the minimum monthly domestic water tariff reaches up to 21% of the income of the poorest.

In this case, due to the way in which tariffs are set, productive use for irrigation from a multiple use water supply is leading to serious problems of equity and financial sustainability which threatens to undermine the entire system.

For more information contact Catarina Fonseca at fonseca@irc.nl The book Beyond Domestic: Case studies on poverty and productive uses of water at the household level (Eds. Moriarty, P., Butterworth, J., & van Koppen, B.) is available from publications@irc.nl with reduced rates available for organisations in the south.