The costs of Level 3 water tariffs on your business

Like many of Cape Town’s accommodation establishments, B.I.G Backpackers in Green Point is housed on a property that was once residential, but has since, within the City of Cape Town’s land use policy, been repurposed for business.

We’re not going to talk here about zoning and the land use of properties. Instead we’re going to talk about how B.I.G Backpackers is being charged for water and sanitation and how the Level 3 water restriction tariffs that are going to come into effect on 1 December 2016 will affect the cost of business.

B.I.G Backpackers is on the City of Cape Town’s domestic water tariff scheme. This tariff scheme is a block tariff scheme that divides the water price into several blocks. Luckily for Cape Town households, the first block, which is the first 6kL used in the month is free. As a property uses more water during the month, the water used in each block gets more expensive.

The City of Cape Town implements one of three domestic block tariff schemes. The first, Level 1, is charged during Level 1 water restrictions (and is actually the normal state of affairs in Cape Town) and pushed for Capetonians to save 10% water. The Level 2 block tariff scheme, which has water priced higher than Level 1, has been in place since January 2016 to encourage Capetonians to save 20% water after the dry 2015 winter season. After another dry winter in 2016 and worryingly low dam levels, the Level 3 water tariff scheme will come into effect on 1 December 2016.

As you can see from the grey line on the graph below, the cost of water used above 50kL per month on the Level 3 scheme is significantly higher than on the Level 1 and 2 schemes. 

Cape Town domestic water tariffs
Cape Town’s domestic water tariffs for 2016/2017

This means that high water consumers, like 57-bed B.I.G backpackers, can expect a very steep increase in the cost of water from December. To get an idea of just how much more B.I.G can expect to pay, we estimated how much the business would be paying for water per bednight, based on the number of bednights sold and the volume of water used in December 2015.

We found that the under the Level 2 tariff scheme, the business would have paid 21% more per bednight for water, itself a large increase. But the big shocker is that the business will pay 143% more per bednight for water under the Level 3 tariff scheme. Any business person will know – costs will be higher and profits lowers. 

estimated water cost per bednight
Water estimates per bednight for all of Cape Town’s domestic water tariffs for 2016/2017

Given the high number of guest houses, B&Bs, self-catering facilities and backpacker hostels in Cape Town, it’s very likely that your business is in a similar position as B.I.G Backpackers – high water usage is a reality in your business but you’re on the domestic tariff scheme. There are two things we suggest you do, regardless of what tariff scheme you are on:

  • Start saving water – now!
  • Encourage your guests to save water

You can find tips on how to do both in our blog on the Rands and sense of saving water.