Economics of household preferences for water-saving technologies in urban South Africa

Abstract

Drought severity is expected to increase in South Africa in the coming years, given the deteriorating effects of climate change on rainfall patterns, global temperature, and evaporation. A common mitigation strategy adopted by households is to promote water demand management initiatives to reduce water consumption volume and complement existing water supply management approaches implemented by suppliers. This study contributes to the discussion on adaptation strategies by investigating household preference heterogeneity for water-saving technologies through empirical evidence from urban Cape Town, South Africa. Using a choice modelling framework, we collected primary survey data from 512 urban households in five of the city's major suburbs and investigated heterogeneity among the households based on their preferences for characteristics embedded in four water-saving technologies. Four preference classes were identified by accounting for taste heterogeneity. Overall, respondents had the highest marginal willingness to pay (MWTP) for the greywater technology alternative at 17,025 ZAR (US$ 1142) while rainwater technology has the least willingness to pay value at 5206 ZAR (US$ 349). In addition, the results show that respondents in classes 1 and 2 have a high interest in technologies that save a large quantity of water, whereas members of classes 3 and 4 rely on inexpensive conservation and behavioral habits as climate adaptation measures. This study has important policy implications for many water-stressed and arid cities within and outside South Africa since like Cape Town, many large cities require long-lasting measures that help reduce the pressure on their strained water systems.

Keywords: Discrete choice modelling; Preference heterogeneity; South Africa; Water scarcity; Water-saving technology.