We have been contracted by the World Bank to review the current IBT water tariff structure in two South African municipalities, eThekwini and Cape Town. The objective is to simulate the application of Ramsey pricing principles to optimise the current IBT structure and assess the impact of alternative pricing approaches on cost recovery, affordability and efficiency. The analysis will shed light on the trade-offs of tariff design in achieving often competing objectives and inform upcoming tariff determinations.

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