The significance of price on demand and management of urban water supplies in Tanzania

Urban water supply crises emanate from the rapid growth of urban centres on one hand and the low service level provided by the government on the other, due to various problems. Limited funds allocated by the central government and low capacity of revenue collection and poor revenue management system are the main sources of the problem. The revenue collected from water sales in the regional headquarters goes to the Treasury as government revenue. As for National Urban Water Authority NUWA which runs the Dar es salaam water supply, the revenue collected are ploughed back for operation and maintenance purposes. However, the water prices and revenue collected do not reflect the opportunity cost of the service. Furthermore there are no considerations made on the willingness to pay in the part of consumers in water pricing. This study looks into the determinants of urban water demand, with consideration of the willingness to pay. The study specifically seeks to identify and measure the major determinants of demand for water in urban areas. Dar es Salaam and Moshi urban water supply are the study cases. Estimation of demand functions is not only useful in forecasting future consumption levels, but also in the determination of future investment. It can also be a useful tool in day to day management of the water utilities. Moreover, policy makers in the sector can use the estimate in water pricing for conservation. Experience has shown that water is underpriced and therefore highly misused. This study provides an opportunity of using water prices as a conservation tool. The major findings of this study are that water price and income do not influence the quantity of water consumed in Tanzania. From these findings suggestions on short run and long run policy implications are made. Since water shortage is rampant in the urban areas of Tanzania, an immediate policy action should be "water pricing for conservation." Before this is done there is a need to strengthen the billing sections of the urban water authorities and to install water meters to all water consumers.