THE JOURNAL OF ENERGY

AND DEVELOPMENT

Ali Bouchrika and Fakhri Issaoui,

“Analysis of the Drinking Water Policy

in Tunisia: Trade-Off between
Efficiency and Equity,”
Volume 45, Number 1

Copyright 2021
 ANALYSIS OF THE DRINKING WATER POLICY
IN TUNISIA: TRADE-OFF BETWEEN EFFICIENCY
AND EQUITY

Ali Bouchrika and Fakhri Issaoui*

Introduction

T he availability of water in sufficient quantity and quality constitutes an im-

portant objective to achieving economic and social development. With cli-
mate change and population growth, we find increasing constraints on the water
supply in different parts of the world and specifically in arid and semi-arid regions.
Given the crucial nature of water and the burgeoning challenges to its provision, it

*Ali Bouchrika, Assistant Professor at the Institut Supérieure de Gestion de Gabes (Univer-
sity of Gabes), received his Ph.D. in economics from the University of Tunis El Manar. His
research interests include the economics of natural resources, economic development,
economic justice, macroeconomics, and growth in transitioning economies. The author has
published more than 20 papers in various journals such as Empirical Economics, International
Journal of Sustainable Economies Management, Journal of Reviews on Global Economics, Journal
of Management Research, and Journal of Environmental Sciences & Natural Resources, as a
sampling.
Fakhri Issaoui, Affiliate in the research laboratory of Prospective, Stratégies et Développement
Durable PS2D (University of Tunis El Manar) and Full Professor at the Ecole Supérieure de
Sciences Economiques et Commerciales (University of Tunis), received his Ph.D. in econom-
ics from the University of Tunis El Manar. His research interests include public and labor
economics, economic development, economic justice, macroeconomics, and growth in
transitioning economies. The author has published more than 50 articles in journals such as
Panoeconomicus, The Journal of Energy and Development, Journal of Cyber Warfare and
Terrorism, Journal of the Knowledge Economy, International Journal of Computational Economics
and Econometrics, African Sociological Review, International Journal of Green Computing,
Economic Research Guardian, and International Journal of Sustainable Economies Management,
as a sampling.

The Journal of Energy and Development, Vol. 45, Nos. 1 and 2

Copyright Ó 2021 by the International Research Center for Energy and Economic Development
(ICEED). All rights reserved.
113
114 THE JOURNAL OF ENERGY AND DEVELOPMENT

is no wonder we see researchers and policy makers increasingly focused upon this
salient subject. In particular, we see greater emphasis on examining water resource
management in academia. Previously, water resource management had not re-
ceived this level of attention, in part due to the fact that until the 1970s the
economics of natural resources was somewhat of a marginalized topic. Today,
with increased attention on sustainable development, access to drinking water is
viewed by many as a basic human right and public policies should be enacted to
protect both the quantity and quality of drinking water. There has been a growing
consensus that water resources must be carefully managed, and that water is a
scarce good, which is difficult to replace, and its usage must be prudently
planned.
In addition to its importance as a strategic consumption good, water is also
considered to be an ecological resource strongly correlated with humanity’s well-
being (including, for example, the preservation of flora and fauna and the public
health dimension). Moreover, from an economic perspective, water can be con-
sidered as a production factor and a lack of it can threaten the levels of production
for a number of key economic sectors, most importantly agriculture.
Thus, given the potential scarcity issues surrounding this resource, the proper
management of water represents an essential challenge for sustainable develop-
ment and a major determinant for improving a nation’s standard of living. Con-
sequently, governments have had to legislate and create the legal foundations
enabling organizations to have the necessary tools for managing access to water
and control over its quality in a responsible and equitable manner.
These policies aim to lead to equitable and sustainable management of water
resources for present and future generations. The economic foundations of sus-
tainable water management necessitate that its use and depletion rate must be
compatible with its renewal rate if this resource is truly to be considered renew-
able. What we have seen in many parts of the world is that water usage is far
outpacing water replenishment, setting up a questionable future for this vital
element.
Consequently, it is imperative to modernize drinking water management and
policies by actions on both the supply and demand side. Nevertheless, it appears
that the supply policies are constrained by the quasi-fixed or limited quantities of
drinking water. In Tunisia, for example, public investment aiming to increase the
quantity of water (by building infrastructure such as dams or desalination of
seawater) almost has reached its limits.
Traditionally, effective water management has been deemed to emanate pri-
marily from demand-side policies that establish real pricing. Real pricing is
considered to be a means of both conserving water and serving as a tool for
managing water demand and, in particular, drinking water demand. This policy
can ensure an economically optimal distribution that maximizes utility and re-
duces waste.
 TUNISIA: DRINKING WATER MANAGEMENT 115

At this stage of analysis, it should be noted that water pricing consists of

distributing service charges across the different users. Tarification objectives are
not limited only to the recovery of economic and financial costs but constitute a
means of ensuring that scarce water resources are socially allocated in an efficient
manner.
In principle, this pricing has a positive effect on social demand in the sense that
it can reduce wasteful consumer behavior and, in theory, give rise to more efficient
resource use. Thus, the prudent management of water resources requires adopting
a pricing method that enables the continuity of supply for the different users at
satisfactory levels of both quantity and quality while avoiding any kind of waste
in the various sectors and overexploitation and degradation of this precious
commodity.
Yet, there is no “one-size fits all” model for efficient drinking water pricing.
The OECD has emphasized the diversity of pricing models used in various
countries.1 According to OECD research, this variance between countries is due to
the prevailing differences in water resource endowments, economic needs, and
cultural and historical traditions (assumed to be determinants in the social function
of water demand). The OECD research also has shown that, in general, water
pricing should consider three dimensions: economic, legal, and environmental.
Thus, the main objective of an appropriate water pricing policy is to achieve si-
multaneously economic efficiency and social equity.
Nevertheless, in addition to the aforementioned goals, an optimal water pricing
policy should achieve three other secondary objectives. First is to ensure a fi-
nancial equilibrium leading the water supplier to cover its charges and to be in-
centivized to continue its activity (expected revenue should cover expenditures
related to the service). Second is to determine a fair distribution of operating costs
among the different users, which means that each consumer should pay a just price
that corresponds to the real quantity and quality of water consumed. In other
words, it is unfair to adopt the same price for all users while the quality of water
consumed is not the same. The third objective is to establish an incentive mech-
anism for preserving water, protecting the environment, and meeting the water
needs of the poorest economic segments of society.
In this paper, we will examine the case of drinking water management in the
case of Tunisia, from a long-term perspective. The remainder of this article is laid
out as follows. In the second section we will discuss theories of water management
followed by the third section where we will present the principles of regulation of
drinking water as an “economic good.” The fourth section will examine the de-
terminants of water price and its possible effect on the demand function. The fifth
section will describe drinking water management and sustainable development.
The sixth section will outline the policy adopted in the drinking water man-
agement in Tunisia followed by the last section where we will present our
conclusions.
116 THE JOURNAL OF ENERGY AND DEVELOPMENT

Drinking Water Management

As previously mentioned, the social importance of water is largely explained

by the fact that access to it and its consumption is assumed to be a natural right.
Consequently, this good must be provided socially without exclusion, meaning
full access for all to quality drinking water. This rule is a basic principle to follow
for service providers—the equality of everyone to have access to this public service.
The equality of access should be based upon three fundamental elements:
accessibility to the good (the resource must be supplied), accessibility at a certain
quality level (an acceptable quality), and, finally, accessibility of price (which
should be based on the ability of the median consumer to pay for the good). In
addition to the social equity issues pertaining to the supply of drinking water,
public policy makers should also factor into their decision making the permanence
and continuity of the service and the security of its operation both on the quan-
titative and qualitative sides. As a result, each user/consumer must have—at all
times of the year and at all locations—access to the amount of drinking water they
need.
Nevertheless, to avoid water resource waste, policy makers should adopt ef-
ficient policies and strategies leading to the preservation of this vital asset. In this
context, the objective of prudent drinking water management is to build a price
vector that is simultaneously just to the median consumer from a cost standpoint
and allows for the rationalization of the demand function of drinking water against
over-consumption. It follows that the management of this resource should in-
corporate the social dimension (by including the different socio-economic cate-
gories of households) by respecting the underlying scarcity of the resource and act
as a responsible steward for present and future generations.
Thus, given the social and economic dimensions that should be integrated in
developing drinking water policies, effective management is complicated because
a plurality of criteria must be taken into consideration to ensure an optimal and
sustainable outcome. The said criteria include efficiency, equity, and economic
development although these are not always compatible with each other and can
carry different weights. At this stage of analysis, the question to answer is the
following: what is the socially desirable trade-off that can be achieved among
these criteria?
Approaches to the Management of Public Drinking Water Service: Gen-
erally, the management of public water service can be divided into two ap-
proaches: the first is based on public management where a public supplier
monopolizes the water market by controlling various stages of water production
and/or distribution whereby water is treated as a public good. The pricing policy is
set with the goal of allowing all households access to the service. The second
approach is based on private-sector management whereby drinking water is treated
 TUNISIA: DRINKING WATER MANAGEMENT 117

as a private good and pricing is based on the goals of efficiency and profit
maximization.
Nevertheless, many countries in the world have adopted a mix of these ap-
proaches combining a set of both economic and social goals. Consequently, the
quality of services must be subject to regulation and the structure and pricing
levels are established by the government according to specific socio-economic
benchmarks.
At this stage of analysis, it is important to note that unlike direct public-sector
management where the government is responsible for service, governance, and
management, commercial management opts for decentralization and financial
autonomy. In other words, each water agency has a budget that is autonomous and
separate from the public budget, which means that they have financial autonomy.
The agencies’ revenues come from the revenues collected from consumer citizens.
However, pricing is still set by the government with the objective of achieving
simultaneously a certain degree of efficiency and equity.
The Principle of Effective Management: Given the important role of public
policy and effective water management, it is clear why theorists have focused on
this subject. For example, to achieve effective management in the water and
sanitation sectors, V. Foster proposed an analysis structure for the modernization
and reform processes.2 The author provides a typical planning model for water
management with the general objective to improve the well-being of the pop-
ulation. According to V. Foster, public administrators will have to determine the
most appropriate structure taking into consideration various dimensions such as
efficiency, accountability, and equity. Consequently, the provision of services is
decentralized with a view to efficiency, whereby services are offered to regional
agencies that are concerned with a specific and well-defined geographic area.
Other authors focus on the pricing dimension. According to P. Spiller and W.
Savedoff both governmental and consumer goals can be achieved through low
water pricing.3 However, this option has a major drawback in that low prices do
not always let the private or public operator accumulate revenues that allow them
to finance the necessary investments needed to meet demand.
Once the government chooses to apply a low-price strategy with the goal of
allowing all socio-economic groups access to water, then it has to figure out how
to compensate the operators’ costs and incentivize them to make the proper levels
of investment required from both a quality and quantity standpoint. In addition,
these governmental transfers are necessary for the operators to avoid financial
bankruptcy and support the sustainability of a low-price structure.
In the cases where society’s water demand increases and if public resources are
scarce, the management of water services will be critical, which is especially true
in urban contexts. To solve this problem, types of regional organizations are being
formed from well-designed partnerships between private companies and the
118 THE JOURNAL OF ENERGY AND DEVELOPMENT

government. This makes it possible to provide an appropriate solution to the needs

of residents in terms of quality of service and environmental protection. Access to
water services for the most disadvantaged will be at an accessible price for all
socio-economic classes.

Principles of Regulation

It is recognized that integrated management of water resources is essential,

especially when conflicts between domestic users and suppliers become more
frequent. To study the consequences of any possible regulatory measure, it is
essential beforehand to know the demand functions of the different users, that is, to
identify the determinants of their water consumption and more particularly the
influence of price on their choices. Resolving resource conflicts can be achieved
by either acting on the supply side to increase the quantity of water available or by
intervening on the demand side by means of pricing, which would reflect the
scarcity of the underlying good, in this case water. These policies can be regu-
latory in nature or incentive-based aimed at changing consumer behavior.
Domestic use is the subject of particular attention from public authorities.
Domestic users can react positively to restrictive or pricing measures by adjusting
their consumption levels so as to favor uses considered to be a priority and result in
conservation behaviors. Thus, measuring the sensitivity of domestic users to their
consumption is a fundamental element of any integrated resource management
policy.
Management Modality—The Supply Side: The water supply strategy deals
with the investment incentives that are necessary to induce suppliers to increase
their capacity to produce more water sources (for example, investments used in the
construction of dams, lakes, wells, pumps, canals, etc.). In general, surface water
resources are those that are utilized first, as other sources of water become less
accessible and more expensive to access. However, to avoid water scarcity, other
sources of water such as groundwater are gaining importance. In the event that a
country finds it is approaching the full exploitation of its renewable freshwater
resources, unconventional methods of water supply are used.
These unconventional alternatives, which may become the only methods of
obtaining new water resources, include the treatment and the reuse of wastewater,
water imports, and desalination of seawater. Nevertheless, the major disadvantage
of these unconventional methods is their expensive cost structures and at times
logistical challenges.
Management Modality—The Demand Side: Demand management can take
many forms but can be divided into two measures: direct and indirect. Direct
measures are those that aim to regulate water consumption. Indirect measures
 TUNISIA: DRINKING WATER MANAGEMENT 119

target voluntary consumer behavior. This consists of appeals to the public through
awareness campaigns, educational programs, and similar initiatives that have
resulted in profound changes in consumer behavior and attitudes toward conser-
vation and environment protection. Nevertheless, this depends on the level of
consciousness of the users and cannot be relied upon exclusively. Lastly, there are
infrastructure-related approaches that would allow for water consumption savings
of between 10 and 30 percent, which could be achieved by reducing water loss by
promoting leak detection and repair programs, the detection of illegal connections,
the reduction of infrastructure pressure, canal lining, and improvements in
transport techniques.
Regulatory Measures: The most direct regulatory measures are to establish
standard rules for the use of water. From a financial point of view, interventions
should be governed by two important principles: the user pays and the polluter
pays. Most often these two principles are seen not only as equitable but also as
economically effective solutions. A water demand management measure attempts
to encourage efficient use to shift to more profitable uses. Water charges have
generally been viewed as a mechanism to finance the operating and maintenance
costs of the water agency.
From this perspective, the demand management approach constitutes the new
policy for water resource management. In this approach, the price instrument can
guide us to a more efficient use of water resources. Indeed, the price appears as an
incentive mechanism that drives users to consume water more efficiently. In ad-
dition, the financial reward encourages water companies to improve their quality
of services and to meet consumer preferences through technical and financial
means. Thus, prudent water resource management requires the adoption of a
pricing method that makes it possible to consistently supply water to different
users in satisfactory levels of both quantity and quality. This pricing method also
avoids any kind of overuse and resource degradation.

The Demand Function of Drinking Water

In general, it appears that the price of drinking water is not the only factor
explaining water consumption. Data compiled by the OECD show that the price
elasticities of water demand are between -1 and 0 for domestic consumption.4
Indeed, studies and analyzes tend to show that the demand for drinking water is
relatively price insensitive, especially in low consumption bands. This is
explained by the fact that in the first consumption band the water demand is used
to satisfy basic and essential needs.
Nevertheless, the higher the initial consumption level, the higher the price
sensitivity. In fact, high consumption, which corresponds to the satisfaction of
120 THE JOURNAL OF ENERGY AND DEVELOPMENT

non-essential needs for households, can be subject to the application of pricing

policy.
In the case of Tunisia, the demand for residential water shows relatively little
sensitivity to prices for the larger consumers in the economically dynamic zones
and those who have benefited from alternative supply sources. According to
M. Matoussi and A. Baranzini, they observed elasticities of -0.77 and -0.59 in
the areas of Greater Tunis and the Northeast, respectively.5
Therefore, rising prices in the upper band of water consumption can help re-
duce the growth in corresponding demand. Following this consumption pattern, it
appears that the use of groundwater leads to over-exploitation, which can have
negative effects on the management of the resource. Thus, it turns out that the
tariff instrument, in these cases, is not enough to preserve the resource and, hence,
the need to create appropriate policies for resource conservation.
The theory suggests that the whole price scale be included in the demand
function for drinking water. In this context, the literature dealing with developing
the demand function model for drinking water has attempted to empirically test the
following hypothesis: at what price (average or marginal) do consumers react
when water is sold by a multi-block price band.6
Conventional theory would assert that water pricing should be determined on
the basis of the marginal price and not on the average price. At equilibrium, the
consumers equalize the marginal price with the marginal utility derived from the
use of the water resource. However, the marginal price, in the case of multi-block
pricing, contains only part of the necessary information. This is verified by the fact
that this price explains the behavior of consumers in a particular segment, but it
does not explain why the consumer chose this segment.
L. Taylor proposes a simple procedure that involves incorporating both the
average and marginal prices into the demand equation.7 The marginal price rep-
resents the price of the consumption band that exceeds the last block in which
consumption took place. On the other hand, the average price is obtained by
calculating the average of the average prices of each consumption bracket.
J. Nordin suggests taking into account the intra-marginal price structure by
including a so-called difference variable in the estimate.8 This variable corre-
sponds to the difference between what the consumer actually pays and what he
would have paid if his total consumption had been priced at the marginal price.
The value of this difference will be positive under a progressive scale and negative
under a declining scale. The difference variable theoretically measures the income
effects generated by the tariff structure. For a progressive or decreasing price per
tranche, the difference has the effect of a tax or a subsidy, respectively.
The Taylor-Nordin drinking water demand function is represented by equation (1):
Q ¼ a0 þ a1 MP þ a2 D þ a3 R þ a4 W ð1Þ
 TUNISIA: DRINKING WATER MANAGEMENT 121

where MP = marginal price, D = difference variable, R = revenue, and W = the

characteristics of the household.
The difference variable and the income variable both measure an income ef-
fect; their coefficients should be of the same magnitude, but of the opposite sign.
The Taylor-Nordin specification has been used frequently. The difference variable
may be too small to have an impact on the perception of income by the consumers.
In another approach, household demand for water consumption is defined by
the relationship between annual consumption by subscribers, marginal or average
water prices, income, and the socio-demographic characteristics of households.
The purpose of this relationship is to identify the effect of marginal and average
prices on consumption. For this reason, the approach of J. Opaluch is used.9 This
approach consists of proposing a model with a marginal price and a variable of
difference between the marginal price and the average price (AP) and is presented
in equation (2).

Q ¼ a0 þ a1 MP þ a2 ðAP  MPÞ þ a3 R* þ a4 W ð2Þ

The aim of this approach is to find out what form of marginal or average price
actually influences consumption. Several works, such as those by D. Chicoine and
G. Ramanurthy and J. Shin, reject the hypothesis of perfect knowledge of the price
structure by households.10 In general, households, in most cases, are sensitive to
the perceived price, which depends on the margin price (MP) and on a perception
parameter k. This behavior will be presented by the following model in equation
(3):
"
#
AP k
logðQÞ ¼ a0 þ a1 log MP þ a2 R þ a3 W
MP


AP
¼ a0 þ a1 logðMPÞ þ a1 klog þ a2 R þ a3 W ð3Þ
MP

M. Nieswiadomy and D. Molina show that the value of the perception pa-
rameter is different depending on whether the price scale is progressive or de-
creasing.11 However, with progressive pricing, consumers seem to be sensitive to
the marginal price, while they would be sensitive to the average price with de-
clining pricing.
According to P. Point, the analysis of demand for drinking water is mainly
focused on needs.12 The quantity of water consumed and prices depend, in par-
ticular, on the development of the population’s needs, as well as life-style. Re-
search to estimate a demand function for drinking water is rare and is mainly
122 THE JOURNAL OF ENERGY AND DEVELOPMENT

exploratory as the quantities of water consumed are often disconnected from the
real costs incurred by the distributing companies.
Among the works that have focused on estimating the demand function for
drinking water we can cite the research by C. Howe and others that relate con-
sumption and price through a cross-sectional analysis.13 P. Point’s research on the
drinking water demand function highlights the problem of sharing resources be-
tween different users. This assessment divides water users into three categories:
commercial, industrial, and domestic. The results show that the price elasticity is
around -0.167 compared to the average price for the department of Gironde in
France. In addition, the research by D. Agthe and R. Billings investigates new
aspects of consumption.14 The authors estimated the demand for drinking water
supply at the country level for Tunisia and for domestic use. They reported a
function with an elasticity of around -0.42 compared to the mean price.

Water Management and Sustainable Development

The management of drinking water remains a top priority for public authorities
who must ensure public health and are entrusted with promoting favorable living
conditions and societal well-being. These obligations underscore the need for
programs and policies aimed at achieving multiple objectives through regulatory
measures in terms of meeting resource quality thresholds, factoring in the various
socio-economic situations of households, and protecting the environment through
a lens of sustainable development.
The objective of drinking water regulation is to create a principle that enables
accessibility such that every user has access to a sufficient quantity of water to
meet their essential needs. This principle also must aim to provide universal ac-
cessibility to an acceptable quality of water service at a reasonable price, which
depends on the socio-economic situation of households. It should be noted that, in
practice, access to drinking water is not universal and that significant inequalities
exist. The provision of adequate and acceptable levels of drinking water is more
common in developed countries relative to developing ones and in urban settings
versus rural areas, which can face obstacles to drinking water accessibility and
other disparities.
The setting of a low price for drinking water is dependent upon the estab-
lishment of a pricing system, which can depend on the volumes of water consumed
and the socio-economic characteristics of the subscribers. Therefore, water pricing
must be used to simultaneously achieve economic, environmental, and social
objectives to meet and support sustainable development.
The Principles of Sustainable Development: Sustainable development is the
organizing principle for meeting human development goals while simultaneously
sustaining the ability of natural systems to provide the natural resources and
 TUNISIA: DRINKING WATER MANAGEMENT 123

ecosystem services on which the economy and society depend. The desired result
is a state where living conditions and resources are used to continue to meet human
needs without undermining the integrity and stability of the natural system. Sus-
tainable development can be defined as development that meets the needs of the
present without compromising the ability of future generations to meet their own
needs. Therefore, natural resources, such as water, must be used in a way that does
not limit their long-term availability. It should be noted that the main objective of
sustainable development within the context of the supply of drinking water means
meeting humanity’s basic needs for all while supporting improved standards of
living for current and future generations.
Water resource management is the cornerstone for sustainable development.
And, although this paper focuses on Tunisia, this issue is far reaching. According
to the United Nations world water development report, one-fifth of the world’s
population lives in areas characterized by physical water scarcity. The increase of
water demand in conjunction with water scarcity is a threat for humanity that is
only expected to worsen in the future. Almost half of the world population will be
living in areas with high water stress by 2030 according to the United Nations.
Thus, potential water resources need to be monitored with care for strategic
management. Water management issues and regulatory approaches require more
attention by the research community, especially in arid and semi-arid countries.
Additionally, water regulations and appropriate management should address en-
vironmental protection while promoting the redistribution of water in favor of less
affluent population groups who often face water access challenges. The principles
of sustainable development are based on a number of societal habits and behav-
iors, which are linked to household consumption patterns. In order to induce ef-
ficient consumption patterns by end users, ultimately the state must play the active
role in decision making for effective water management to ensure sustainable
development at a macro-level and to improve sustainable water service.
In addition, sustainable development consists of balancing the objectives and
trade-offs between promotion of the economy, society, and the environment. First
is to move from short-term economic profitability to long-term efficiency. Sec-
ondly is the move from uniform equality to territorial and geographic equity. And
third is from strict ecological conservation to intra- and inter-generational envi-
ronmental balance. Furthermore, to achieve a regional development program,
these principles must be implemented across the board. It should be noted that
sustainable and equitable development must meet the basic needs of the pop-
ulation and reduce inequalities among households. Indeed, local authorities are
attempting to respond to the increasing complexity and interdependence of the
problems generated in the quest for sustainable development by promoting greater
institutional alignment and organizational capabilities that will foster resiliency.
124 THE JOURNAL OF ENERGY AND DEVELOPMENT

Governance and Drinking Water Management: Proper governance is a

principle that translates the international community’s awareness of the limits of
current development models into actionable resource management and policies
to support sustainability. This requires the advancement of new development
frameworks that consider the need to safeguard basic ecological values and human
development goals with a more equitable distribution of water resources while
providing resource stewardship for future generations.
Water governance must be crafted and implemented within the lens of social,
economic, and administrative political systems, intended to regulate the devel-
opment and management of water resources and its supply. Seen within a broader
vision, water governance is capable of influencing social, political, and economic
organizations and institutions to guarantee the optimal development of water
management. Given the complexity of the different modes of water use within
society, water governance must apply the appropriate strategies so that the man-
agement of this resource is efficient and equitable, which has been a challenge in a
number of countries.
From an environmental perspective, the sustainable management of water in
terms of quantity must guarantee the conservation of surface and underground
water resources, as well as protect its quality. In other words, as in any field, the
water sector must be supported by economic and financial instruments capable of
incorporating the environmental dimension.

The Current Policy for Drinking Water Management in Tunisia

Tunisia has implemented a number of strategies to address water scarcity in-

cluding utilizing all existing available resources, the use of unconventional re-
sources, and water savings and conservation solutions. Thus, the main objective of
water policy in Tunisia is to define a set of programs and measures to secure the
water needs of current and future generations. Predictions of future needs take into
account the rate of population growth and economic activity.
Tunisia began to implement, especially from the 1970s onward, the develop-
ment and regularization of its water resources through a number of major water
projects. The objective was to identify all possible uses and various sources of
water supply. The national strategy for mobilizing water resources is still con-
tinuing today given the country’s limited water resources. In addition, the gov-
ernment has also focused on solving long-standing regional and local resource
quality problems. The Tunisian government sought to address equity disparities
between regions by transferring water between different groups of consumers to
address the problem.
As Tunisia is reaching the threshold of exploitable water resources, it must now
aggressively manage its water resources with the goal of optimizing water
 TUNISIA: DRINKING WATER MANAGEMENT 125

consumption by different uses. Indeed, the goal of this principle is to guarantee

maximum recovery per cubic meter of water to ensure sustainable management.
The government has prioritized access to drinking water with the goal of equal-
izing access in rural areas, which are not yet served or underserved by SONEDE,
the National Water Supply Authority in Tunisia. For this reason, SONEDE’s
pricing policy is aimed at meeting the needs of rural consumers.
Water-Saving Measures: In Tunisia, water pricing is based on progressive
tariffs with the objective of penalizing excess consumption to discourage waste.
However, to enhance the success of the nation’s water conservation strategy,
regulatory and financial measures have been implemented by the government, in
particular, the establishment of a continuous educational and awareness outreach
program aimed at all categories of water users, especially larger consumers, in
order to reduce water consumption and avoid waste. Moreover, the government
insists that larger water consumers utilize water-saving controls and follow-up on
their installations with assessments from experts who are engineers with spe-
cializations in the field of water and have received professional training in
drinking water management systems. In addition, other measures are taken by
reserving a part equal to 20 percent of the investments made for the imple-
mentation of systems using unconventional resources and by involving the private
sector in the production and use of water in areas where it is limited as part of
integrated projects.
Additionally, SONEDE has adopted water-saving strategies based on programs
that incorporate social, organizational, technical, and financial factors to incen-
tivize water conservation behaviors. Water pricing is an instrument used by
SONEDE for managing water demand, which encourages consumers to reduce
water consumption and limit waste. In addition, structural and organizational
measures have been established at the regional level, which include operational
capabilities to repair breakages and leaks, and by the creation of a central de-
partment for water conservation to ensure the implementation and monitoring of
water conservation metrics and programs.
From a technical perspective, SONEDE utilizes water mapping, improved
metering, rehabilitating pipes and connections, reducing pressure, and detecting
and repairing leaks. SONEDE also conducts a communications and marketing
strategy through campaigns targeted at various water users through advertisements
on television and radio. In addition, information and awareness days are regularly
organized in order to inform and educate consumers about the water challenges in
Tunisia and proper water conservation. All these measures have allowed SONEDE
to improve its performance indicators and metrics; as a result, water loss has
decreased significantly in recent years.
Water Pricing Policy: In theory, the pricing structure of drinking water is one
of the most significant tools in the arsenal of water consumption and conservation.
126 THE JOURNAL OF ENERGY AND DEVELOPMENT

In the case of SONEDE, policy is based essentially on non-linear pricing by

consumption bands with the objective of penalizing the groups of consumers who
waste the most water resources. It should be noted that the average sale price of
water experienced an average change of 2.2 percent per year during the period
1971 and 2016, which is our study period. Indeed, for the domestic and industrial
sector, the price recorded a fairly gradual increase and, in particular, this was
experienced in the lower consumption bands. However, for the tourism sector, the
price was relatively uniform and, since 1984, is equal to the price of the last
tranche (151 and more) of domestic and industrial use.
Despite price increases, water consumption in the domestic sector has
exhibited a fairly strong rate of growth. This is explained by the fact that drinking
water is a basic necessity for households. In the industrial and tourism sectors, an
increase in prices may partially explain decreased consumption for these two types
of users. Faced with growth in water demand for the country’s development needs,
the strategy adopted by sector officials aims to stabilize water consumption. In-
deed, the quest for maximum technical control of the entire water supply and
infrastructure by mobilizing and regulating most flows and by setting up an
interconnected network, attempts to control the problems of increased consump-
tion and demand at the national level. This highlights the importance of estab-
lishing an optimal national allocation strategy for water resources among competing
consumers and between regions.
Sustainable Management Measures: Within the context of sustainable
management of drinking water resources, supply scarcity can complicate the de-
velopment of effective and equitable water management policies. Furthermore,
population growth accompanied by an increase in the number of consumers fur-
ther compounds the challenges facing policy makers. However, in the face of
growing water demand and its effect on a country’s development needs, the for-
mulation of an optimal water management strategy must seek to balance optimal
water use, conservation, and social justice to achieve a long-term economic bal-
ance. It is a question of implementing technical and regulatory economic instru-
ments to reduce losses and stabilize per unit consumption.
From a demand management approach, pricing can be used as a policy in-
strument to induce a more balanced use of water resources. Pricing can provide an
effective mechanism that impacts users’ consumption patterns relative to the
supply constraints of existing production capacity. In this context, direct elasticity
is an economic indicator that can provide information on the reaction of con-
sumers to increases in water prices. In Tunisia, the pricing policy seeks to ensure
the viability of the water sector by covering operating costs and financing
equipment costs.
Thus, the management of drinking water demand is based upon a solid un-
derstanding of the economics and implications of pricing policy using an
 TUNISIA: DRINKING WATER MANAGEMENT 127

escalation of tariffs to penalize excess consumption and limit waste in order to

achieve sustainable water management. The long-term balance between produc-
tion capacity and changes in the consumption structure is the solution that can
support sustainable management for present and future generations. Indeed, a
preliminary analysis consists of producing information on the variation of the
main variables in the management of the demand for drinking water, such as the
variations in the relationships between consumption, production, price, and the
numbers of subscribers, as an indicator of the sustainability of this vital good in the
Tunisian case.
Drinking Water Consumption and its Components: Given the demographic
and economic growth that Tunisia is experiencing, the drinking water tariff policy
priority is to promote efficient consumption patterns and behaviors while ensuring
the sustainability of the water sector. This approach also calls for the appropriate
conservation and use patterns across multiple sectors.
We will now evaluate the current drinking water management in Tunisia
and its effect on consumption in three sectors—domestic, industrial, and
tourism—utilizing an econometric study over a period from 1971 to 2016, which
seeks to explain the influence of price, number of subscribers, and production
on the consumption structure. All variables are expressed in logarithmic form
and, therefore, the parameters constitute elasticities. Table 1 presents the results.
In the domestic sector, the estimated coefficients are largely significant at the
95-percent threshold, which implies that the variables of price, number of sub-
scribers, and production have a multiplier effect on consumption in the domestic
sector. Likewise, we note that if the price increases by 1 percent, consumption
increases by 0.15 percent. This brings us to the assertion that the price factor no
longer appears as an incentive tool for the conservation of the resource. Indeed,
because drinking water is a strategic good and not substitutable for households, its
demand appears to be non-compliant with the famous “law of demand.” In ad-
dition, the significance of the variation in domestic consumption in relation to the
number of subscribers shows that an increase of 1 percent in the number of sub-
scribers results in an increase in consumption with a fairly high proportion of

Table 1
TUNISIA: ESTIMATION OF THE SECTORIAL CONSUMPTION FUNCTION, 1971–2016

Sector Constant Price Number of Subscribers Total Production

Domestic –2.41 0.15 0.54 0.16

Industrial –0.32 0.20 0.34 0.12
Tourism –1.81 0.17 0.45 0.14
128 THE JOURNAL OF ENERGY AND DEVELOPMENT

around 0.54 percent. This result shows that the mass effect risks depleting re-
sources in the medium and long term given the limited capacity of production. In
addition, the relationship between consumption and total production is unverified.
Thus, an increase of 1 percent in production leads to an increase of 0.16 percent in
consumption.
In the industrial sector the variables of price, number of subscribers, and
production significantly and positively affect the level of consumption at the
99-percent threshold. Indeed, a price increase of 1 percent leads to an increase in
consumption of 0.2 percent. This positive relationship shows that the price cannot
be considered as an incentive to lower consumption. Thus, industrial users, who
are for the most part considered as large consumers, are generally located in the
consumption band 151 m3 and greater where the price is the highest.
Regarding the number of industrial subscribers, a 1-percent variation in this
variable has the effect of increasing consumption by 0.34 percent. Indeed, the
variable number of subscribers does not have a significant effect on consumption.
This phenomenon is explained by the partial or total use of industries of supply
sources other than those provided by SONEDE. In the industrial sectors, changes
in production do not have a significant effect on consumption. Indeed, if pro-
duction increases by 1 percent, consumption increases by 1.1 percent. This is
explained by the effect that in this sector the large industrial consumption is met by
supply sources outside of SONEDE’s water supply.
In the tourism sector, the coefficients of the variables of number of subscribers
and production are significant at the 99-percent threshold. Similar to what we
uncovered in the other sectors, we find that for the tourism sector, price cannot
incentivize users to reduce their water consumption. The variable of the number of
subscribers does not seem to have a large effect on consumption, which is
explained by the fact that several hoteliers have resorted to the use of water from
their own wells, in particular for different uses. In addition, the relationship be-
tween consumption and production in the tourism sector is consistent with the
phenomenon observed in the industrial sector.
Assessing the Long-Run Drinking Water Equilibrium: To analyze the long-
term situation of drinking water management in Tunisia, we will study the sus-
tainability measures in each sector. Our analysis evaluates the efficiency of pricing
policy, the number of subscribers, and production on the consumption structure for
drinking water over the long run. To do this, we studied stationarity and the
cointegration between consumption and its components in order to assess the
sectoral strategy for the management of drinking water in Tunisia.
In the domestic sector, the two consumption and price series are stationary at
the first difference with the estimated statistics of the augmented Dickey-Fuller
(ADF) tests -4.21 and -4.62, respectively, which are below the critical value
(-2.96) at the 5-percent threshold. In addition, the results conclude that the residual
 TUNISIA: DRINKING WATER MANAGEMENT 129

series of the statistical relationship between household consumption and the price
is not stationary (-3.21 > -3.67) and the two series are not cointegrated; therefore,
there is no long-term equilibrium relationship between these two variables.
For the industrial sector, the results show that the consumption, price, and
number of subscriber series are stationary in primary difference at the 5-percent
threshold. The estimated values of the ADF statistic are -4.35, -4.53, and -3.21,
respectively, and below the critical value of -2.96. In addition, the cointegration
tests between the pairs of consumption and price, on the one hand, and con-
sumption and number of subscribers, on the other hand, are subject to spurious
regressions (-3.14 > -3.67; -3.51 > -3.67). However, the non-cointegration of these
two pairs shows that the long-term equilibrium cannot be achieved. This explains
why the current management policy and strategy can only be effective for short-
term projections.
Regarding the tourism sector, the application of the ADF test shows the
stationarity of the three series—consumption, price, and number of subscribers—
expressed as the primary difference at the 5-percent threshold. Estimated ADFs are
-4.08, -5.37, and -3.52, respectively, which are less than the critical value of -2.96.
The results also show the non-stationarity of the series of residuals calculated from
the statistical relationship between consumption and the price in the tourism sector,
(- 3.42 > -3.67), on the other hand, and the stationarity of the series of residuals
calculated from the statistical relationship between consumption and the number of
subscribers in the tourism section (-3.72 < -3.67). Consequently, in the tourism
sector there is no cointegration relationship between the two consumption and price
variables, which leads to a long-term imbalance in the evolution of these two
variables. On the other hand, the balance between the two consumption variables
and number of subscribers seems to be reached and, thereafter, we find a stable
relationship between these two variables for a future projection. This is verified by
the cointegration relationship between the two variables. However, this latter result
is very critical of the fact that the decrease in consumption in this sector is mainly
due to the search for other sources of supply.
In our evaluation of the two consumption variables and the total production
variable, the results show that the null hypothesis test of the unit root on the series
in first difference provides the stationarity of the two consumption and production
series, given the estimated and critical values. (-4.25 < -3.53; -5.29 < -3.53) at the
statistical threshold of 5 percent.
In addition, the estimation of the statistical relationship between consumption
and production aims to deduce the series of residuals. The results from the
application of the ADF test on the series of residuals show the non-stationarity
of the series at the 5-percent threshold. Indeed, the estimated ADF statistic
(-3.04) is greater than the critical value (-3.67), so the estimated relationship
between consumption and production is a fallacious regression. Consequently,
the consumption and production series are not cointegrated, i.e., there is not a
130 THE JOURNAL OF ENERGY AND DEVELOPMENT

long-term equilibrium between these two variables, and this poses a problem
for drinking water management in Tunisia with significant implications for
policy makers.

Conclusion

This analysis highlights the essential challenges for the current policy of
drinking water management in Tunisia, which shows the unsatisfactory results in
affecting the consumption structure according to the price variables, the number of
subscribers, and production. Indeed, this complicates the objectives of sustainable
management of drinking water in the Tunisian case. On the other hand, we note
that household consumption is still following an exponential rate of growth despite
the scarcity of this vital good.
Thus, the tariff pricing approach that is being applied cannot encourage the user
to conserve drinking water. Furthermore, the pricing structure does not make
distinctions between the socio-economic classes of consumers or between the
level of quality of service offered by the public authority. In this context, drinking
water is considered by sector decision makers as a homogeneous good despite the
enormous variations in the physical characteristics at the regional and national
level. Consequently, whatever the nature of the drinking water supplied, SONEDE
has the same price, which results in placing a premium on quantity relative to
quality. This may present a major obstacle in the current strategy of managing
drinking water in Tunisia in the future.
In addition, the other factor that complicates effective drinking water man-
agement is that the quality of service provided to the user depends on the level of
coverage of the costs of drinking water by the tariffs applied. Indeed, if a public
drinking water supply service fails to recover most of the real costs of water, it will
not be possible to ensure an acceptable quality water supply.
However, in Tunisia, the water price does not cover the cost, which obviously
leads to a negative impact on the level of the quality of the service provided. It
should be noted that the long-run marginal cost is systematically higher than the
average price charged. Indeed, this price currently can only reach, on average, 75
percent of the long-run marginal cost. Consequently, this represents a major ob-
stacle to obtaining a better quality of service, especially for low-income users who
cannot bear the real cost of water. Thus, the Tunisian government must work on
developing additional tools to support its drinking water management policies that
can address these gaps and ensure equitable access to an adequate supply of
quality drinking water for its citizens. It is essential to balance regional and socio-
economic inequalities for a long-term solution that supports current and future
generations.
 TUNISIA: DRINKING WATER MANAGEMENT 131

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