The paradox of cost recovery in heterogeneous municipal water supply systems: Ensuring inclusiveness or exacerbating inequalities?

Over the past decades ‘water for all’ has become a dominant development mantra, illustrated by global strategies like the Millennium Development Goals (2000–2015) and the Sustainable Development Goals (2015–2030). Cost-recovering tariffs have been placed at the core of these strategies on the grounds that they warrant more inclusive water services by enhancing utilities' performance, ensuring efficient demand management and empowering consumers. This paper questions these assumptions for cities in sub-Saharan Africa, where inclusive urban water services are to be achieved in a context of extreme socio-economic inequalities and the water utility provides water through heterogeneous service modalities. Drawing from empirical evidence from Maputo and Lilongwe, we conclude that in this context the implementation of full cost recovery principles may exacerbate rather than reduce inequalities in access to drinking water. Water utilities tend to outsource service provision to lower income areas to small-scale or “social” private sector. These providers apply full–cost recovery principles more rigorously, as they cannot operate in a deficit. Moreover, they are unable to (cross)-subsidize and they do not enjoy economies of scale. As a result, wealthier neighbourhoods, where the water utility provides services directly, often access water at subsidised rates, while in low income areas, where service provision is outsourced, people access lower quality services at a higher price.