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Frontiers in Environmental Economics and Natural Resources Management Toulouse, June 9-11, 2008

Water Demand Shock and Water Intensity in Senegal: a computable general equilibrium approach

Anne Briand* Olivier Beaumais*

Bernard Decaluwé**

*CARE (Centre d’Analyse et de Recherche en Economie) UFR Droit- Eco- Gestion

3 avenue Pasteur 76186 Rouen cedex

France **CIRPEE, Université Laval, Québec

Tel : 0232769861

Anne.Briand@univ-rouen.fr

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Abstract: As several recent papers testify, the water intensity, i. e. the ratio between water consumption in physical units and the value of economic output, measured as gross output or as value added, rises sharply in the early phases of economic development. For a developing country like Senegal, this implies that per capita water consumption will certainly increase with economic development, so as sectoral water intensities. In our paper, we propose to address this water intensity issue by designing an appropriate water demand shock within a computable general equilibrium framework. More precisely, this paper presents a static computable general equilibrium model applied to the Senegalese water sector. It focuses on a water production sector which produces drinking water from raw water (surface water and groundwater) and describes three drinking water distribution sectors (private connections, standposts and informal). The first section presents the drinking water distribution policy in Senegal and the formal/informal duality on this market. The second section describes the methodology and the model. The last section analyses the simulation results of a 30% increase in the drinking water demand in Senegal. We present the transmission channels of the shock on the different sectors and households. Classification JEL: C68, O13 Keywords: Water Intensity, Computable General Equilibrium Model, Developing country, Africa. Résumé : Cet article présente un modèle d’équilibre général calculable appliqué au secteur de l’eau au Sénégal. Son originalité repose sur la construction d’un secteur de production d’eau potable qui transforme l’eau primaire en eau potable et trois secteurs de distribution d’eau potable (branchement privé, borne fontaine et informel). La première section présente la politique de distribution d’eau potable du Sénégal ainsi que le problème dualité formelle/informelle de ce marché. La seconde section décrit la méthodologie et le modèle. La dernière section analyse les résultats de la simulation d’une hausse de 30% de la demande d’eau potable au Sénégal. Nous présentons les canaux de transmission du choc sur les différents secteurs et les ménages. Classification JEL : C68, O13 Mots-clés : Intensité en eau, Modèle d’équilibre général calculable, Afrique

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Introduction Despite the modernization of the water sector, Senegal still suffers from an insufficiency of the drinking water distribution network. Thus, many poor households living in urban or rural areas do not have access to safe water. Since 1996 (sector privatization), SDE1 has implemented many investment2 programs aimed at increasing the production capacity and at extending the drinking water distribution network (private connections and standposts; SONES, 2004). But many people living in small areas are not yet connected. Hence, an “alternative” informal water service remains active. A survey (Diagne, Briand, Cabral, 2004; Briand, 2006) conducted in Dakar in 2004 shows that informal operators (water carters) are important both in terms of the number of operators and of users. This survey also reveals that households and small non-domestic users (market-gardeners, florists, brickmakers) rely on the water carters services. The formal distribution network is therefore clearly insufficient. Moreover, the drinking water needs in Senegal will considerably increase in the near future as the population grows, and the basic needs and other sector needs due to the economic and social development of the country expand. A drinking water demand projection study, provided by SDE (2004), shows that on the lowest assumption, the domestic and non-domestic water demand (irrigation not included) will increase by 32% from 2000 to 2020 (Management System Consultants Corp, 1998). Then, all the water policy in Senegal is based on this assumption of a 30% increase in future water demand (Ndaw, 2005; SDE, 2004; SONES, 2003). So, resource allocation conflicts are likely to occur between various users (domestic, agricultural, industrial and services). Furthermore, recent papers (Cole, 2004; Luyanga, Miller, Stage, 2006) show that the water intensity, i. e. the ratio between water consumption in physical units and the value of economic output, measured as gross output or as value added, rises sharply in the early phases of economic development. For a developing country like Senegal, this implies that per capita water consumption will certainly increase with economic development, so as sectoral water intensities. In this paper, we propose the construction of a theoretical consistent framework to describe and to understand all the resource feedback effects of such a demand increase on the Senegalese economy. More precisely, to assess this question, we rely on a computable general equilibrium (CGE) approach which allows to model the behaviour of the firms and the households, and the interactions between all of them. Our CGE model focuses on the water users (irrigated rice, market gardening, intensive water industrial sectors and services). In an original way, it models a drinking water production sector which combines the raw resource with labour and capital to produce drinking water and distinguishes three drinking water distribution sectors (private connection, standposts and informal). Especially, our model describes the mechanisms through which changes in water prices (private connection, standposts and informal) affect on the one hand, the water-user sectors (agricultural, industrial and services) and on the other hand, households (Dakar, other urban and rural areas). It highlights the new water allocation between uses. More particularly, it presents the substitution

1 SDE : Sénégalaise des Eaux. 2 The Water Sector Project (WSP) was designed in 1996 to continue the first program of production capacity reinforcement in Dakar and in eleven urban areas, completed in 1993. This one aimed at increasing drinking water availability and at improving service to users. Since 2003, a new investment program, the Long-term water Sector Program (LSP) is in effect.

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effects between the three modes of drinking water provisioning for intermediate or final consumption, by activity and household. It evaluates the impacts in terms of welfare changes. The first section presents the drinking water policy for the poorest in Senegal, describes the duality (formal/informal) of the drinking water distribution market and shows its impacts in terms of heterogenous water prices faced by the households. The second section presents a short review of the literature on CGE models applied to water, the construction of the database (SAM3, 1996) and the model structure. The last section assesses the impacts of a 30% increase in the drinking water demand on the water-user sectors, on the households and on the total welfare. 1. The drinking water distribution in Senegal (1996-2003)

1.1 The drinking water program for the poor A substantial proportion of the Senegalese population is poor. 54% of the population lives below the poverty line in 20024. The UNDP5 report notes that only 73% of the population has access to drinking water (2001). But strong geographical disparities persist. The UNDP report also notes that the access to drinking water increases in rural areas, but decreases in urban areas. Indeed, the objective of 35 litres per person a day is not reached. Only half of the drinking water needs are satisfied in the rural areas. The Senegal’s Poverty Reduction Strategy (2003-2005) aims to increase by 12% the rate of drinking water access by 2010. In the SPRS, this rate is considered equal to 70% by assuming that a distribution point is accessible if it is located less than 15 minutes walk or less than one kilometre. The drinking water service improvement program for the poor comprises several components (SONES, 2002). Notably:

- Investment programs aimed at increasing the water production capacity (WSP et LSP); - Social water connections programs aimed at making connections affordable to those not

yet connected, financed by government funds (World Bank project); - Installation of public standposts in areas where there are people without private

connections (financed by the government with funds from the World Bank project); - Subsidized low consumption (water minimum to cover basic needs) financed through a

cross subsidy between consumers. The increasing block tariff defines a “social tariff” for water consumption under 10 m3 per month (low consumption).

1.1.1 The distribution networks extensions and social connections

Since 1996 (water sector privatization), distribution networks have been extended by approximately 1,100 km: an increase of 23% (WSP). To increase water supply to the poor, the government has a policy of providing small diameter (15mm) private connections to poor households. These “social connections” are subsidised. 67,000 social connections (for low-income households) were installed at no cost to the households. The average cost by social connection rose to 60 000 FCFA (SDE, 2004).

3 SAM: Social Accounting Matrix. 4 Senegal’s Poverty Reduction Strategy, 2002. 5 UNDP: United Nations Development Program.

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These extensions and connections programs were intended for non-connected districts, and in particular, for the poorest population. Although priority areas were initially defined to be able to profit from a subsidised connection, the majority of the requests (90%) were finally taken into account. 74% of the new connections were installed free between 1996 and 2002 (SONES, 2003; SDE, 2004). The government objective is to reach all the poor with private connections through the social connections program. But in reality, it is not sure that this policy reached the poorest. “The poorest households are precluded from having subsidised connections because the social connection programs are intended for stable neighbourhoods where the residents have established themselves” (Lauria, Hopkins, 2003). In order to obtain a social connection, an applicant must have title to the land and an existing house must be located on it. Thus, the attribution criteria lead to privileging established households, including the relatively poor, and excluding the poorest one (Lauria, Hopkins, 2003). 1.1.2 The public standposts

The Senegalese government policy is to provide water service to all households through formal water supply. Standposts are seen as a temporary method of supply. Indeed in the long-term, the aim is eventually to provide each household with a private connection. But, for the moment, the public standposts provide water to people without private connections. Between 1996 and 2002, the number of standposts increased from 2,620 to 4,250, an increase of 60% (SONES, 2003). However, the number of non-working standposts remains large (between 15 and 20%). This reveals a network which is not yet optimized. The low average volume invoiced by working standposts (650m3 a year against 2 000m 3 in other African countries), confirms this phenomenon (SDE, 2004). The standposts represent less than 10% of the volume invoiced with the households and approximately 15% of that invoiced with the social block tariff (SDE, 2004). With an average of a low drinking water consumption (between 18 and 20 litres per person a day), due to the possibility of supplying itself with private wells(6), the population using standposts can be estimated to be between 620,000 and 680,000 people, 10% of the population of the provided districts (SDE, 2004). 1.1.3 The “social tariff” block The Senegalese government has developed a policy of subsidizing low consumption of water (low price). The first block (social block) was designed in order to subsidize the poorest households’ consumption by that of the richest. In 2002, the connected households consumption under 10 m3 per month benefit from a strongly subsidized tariff (60%). This “social tariff” is priced at 186 FCFA per m3 (SDE, 2004). This social block corresponds to 100 litres a day consumption for only one person (consumption profile of the high income people) or, 22 litres a day for a household of 15 people. It should be noted that the economic interest of a higher subsidizing social block is not shown because it is not very discriminating and it benefits all households. Standpost water tariff (274 FCFA per m3) is less subsidized (40%) than the social tariff of the private connection (SDE, 2004). The standposts have the advantage of providing services quickly to those living in areas where the piped network does no exist. But standposts do not necessarily provide the lowest-cost water to the poorest. For example, under the 2003 tariff, licensed vendors sold water at standposts at 315 FCFA per m3, while the “social tariff” block was 186 6 Average consumption per capita providing only by one standpost is between 25 and 30 litres per day.

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FCFA per m3. Consumers using water from the standposts have to pay the overhead of the licensed vendor, or re-seller, who manages the standposts. A survey conducted in Dakar in 2004 shows that consumers buy water in 40 litre plastic basins, at 25 FCFA per basin (625 FCFA per m3) (Diagne, Briand, Cabral, 2004). This means that consumers are paying a 98% “overhead” on this water. Households consuming water from standposts are paying about 350% of the current social tariff and about 2% more than the regular, unsubsidized tariff for private connections and commercial institutions. Because social connections are free, the difference between the “social tariff” at the private connection and the standpost tariff is not economically justified (Lauria, Hopkins, 2003: Trémolet, 2005). Moreover, the increasing block tariffs can generate adverse effects (Whittington, 1992). Despite the Senegalese water program for the poor, gaps in the sector persist. So, a palliative informal sector strives in the water distribution market. 1.2 Formal-informal duality in the drinking water distribution and its impacts in term

of water price heterogeneity

As it is well known and pointed out above, various water supplies exist in Africa:

1) Traditional sources: private wells, rivers, rainwater; 2) Formal water services: manual pumps, public wells, standposts, private connection; 3) Informal water service: water carters and water carriers.

Obviously, the analysis of the drinking water market can not be confined to the official distribution network, especially for the low-income consumers. Indeed, surveys in Africa show that, each day, the households trade-off between various water supplies (Whittington et alii, 1990; Diagne, Briand, Cabral, 2004; Briand, 2006). This trade-off behavior depends on the household’s incomes and on the time availability. Indeed, to buy water from water carters (informal operators) is more expensive than from standposts, but saving of time (no distance, no time wait) can make it possible to earn more money. So, time, as an opportunity cost, is an important factor in the low-income household’s trade-off.

Water companies refuse to invest in network extensions in poor areas. They fear the irregularity of potential users’ affordability. Even if they accepted to extend the network to these areas, they would be confronted with technical issues because of the anarchistic occupation of the urban space.

Thus, the informal operators cover this unsatisfied demand. Their macroeconomic weight is significant in term of value added. According to a report7, the private operators (the majority being informal) realize between 21% and 84% of the water sector value added (Collignon, Valfrey, 1998). Moreover, the proportion of jobs created by the informal distribution is larger (3 to 13 times more) than that of the water firms (even if it is about precarious or transitory employment).

Table 1 helps us to understand the impacts of the formal/informal duality of this market on the drinking water prices faced by the Senegalese households.

7 Synthesis of the different surveys realised in Burkina-Faso, in Cap Verde, in Haiti, in Mali, in Mauritania and in Senegal by HYDROCONSEIL (Colligon, Valfrey, 1998).

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Table 1: Drinking water prices in Senegal by distributor Distributor Water supply Formal/Informal

segment Water price (taxes not included) in 2003 (FCFA per m3) « Social » tariff8 : 186.32 « Full » tariff9 : 548.24

Private connection

Connection to the network

Formal drinking water distribution

« Dissuasive » tariff10 : 629.84 Official tariff : 315.09

Standposts Retail water sale from the standposts connected to the network

Formal drinking water distribution

Actual tariff: 833 Informal tariff : 3750

Carter Water delivery at home with bucket or barrel (200 litres)

Informal drinking water distribution

(750 FCFA per barrel 200 litres)

Source: Table built from SDE and SONES data (2004) and from a water survey conducted in Dakar (Diagne, Briand, Cabral, 2004). As we wonder how an increase in water demand, due to the Senegalese social and economic development, affects the different water prices, the CGE approach is adapted. It allows describing and understanding, in a theoretical coherent framework, the feedback effects of the water resource on the various economic aggregates. After a short review of the literature on the CGE models applied to water, we will present the database (SAM) and the model applied to Senegal. 2. The model: structure and results 2.1 Review of the literature on the CGE water applied models CGE models are well suited to assess water management issues because they make it possible to compare the effects of various policies scenarios on the sectors and agents of the economy. Berck, Robinson and Goldman (1991) built a CGE model in order to analyze the impact in term of efficiency of a decrease in water use in the South San Joaquim Valley. Dixon (1990), Horridge et alii (1993), Decaluwé et alii (1998), Decaluwé et alii (1999) and Thabet (2003) analyze the impact in term of efficiency of various water pricing policies. But they only deal with agricultural water pricing (marginal cost, average cost and Ramsey-Boiteux pricing). Seung et alii (1998) concentrate on the issue of the welfare effects associated with the transfer of the water resource use from the agricultural sector towards a recreative use of the "Walker River Basin" in California. Seung et alii (2000) combine a dynamic CGE model with a demand model for a recreational use of water to analyze the effects of water re-allocations in the county of Churchill (Nevada). Diao and Roe (2000) build a CGE model to study the consequences of a protectionist agricultural policy in Morocco. They show how the agricultural liberalization creates

8 « Social » tariff: 0-20 m3 in 60 days. 9 « Full » tariff: 21-40 m3 in 60 days. 10 « Dissuasive » tariff: more than 41 m3 in 60 days.

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the necessary conditions for the design of an efficient water tariff (with the emergence of a water market in the rural sector). Goodman (2000) shows that transfers of the water resource represent a less expensive option than that which would consist in building new dams or in increasing the existing storage equipment. The majority of the studies focuses on the agricultural water issues. Following Berck et alii, 1991; Robinson, Gehlar, 1995; Goodman, 2000; Gomez et alii, 2004; Thabet, 2003, raw water is a production factor. Furthermore, considering the issues we want to assess, we choose to specify a water production sector, which treat raw water, and three drinking water distribution sectors in order to match the actual water uses in Senegal. 2.2 The Social accounting matrix (SAM) The model calibration requires the construction of a Social Accounting Matrix (SAM) for the Senegalese economy. The SAM provides a useful insight into the structure of the economy and illustrates the links between agents in the economy. The SAM used for our model is an aggregated and disaggregated version of the SAM built by Dansokho, Diouf (1999) and Cabral (2005). The macroeconomic data are provided by the DPS11, from the input-output table. Incomes and consumption data are taken from the Senegalese Income Expenditure Household Survey (ESAM12, 1995). The water data come from SONES and SDE (2003, 2004). The disagregation of the energy sector in electricity-gas, drinking water production, formal drinking water distribution via the private connections, formal drinking water distribution via the standposts and informal drinking water distribution, stems from data resulting from surveys (Collignon, Valfrey, 1998 ; Diagne, Briand, Cabral, 2004; Briand, 2006). We consider that the Government holds the raw water stock (production factor), and sells it to the irrigated rice sector and to the drinking water production sector. The drinking water production sector combines this resource with labour and capital to produce drinking water. This drinking water is distributed by three channels (private connection, standposts and informal carters) and consumed as input by the other sectors (agricultural, industrial and services) and as a final good by the households. The SAM is composed of fifteen sectors. It focuses on the water user sectors. Taking into account a water intensity criteria (see Appendix A1.3), the SAM distinguishes the water intensive agricultural sectors such as irrigated rice, rain rice, the market gardening, fishing, and the non-water intensive agricultural sectors. It describes a drinking water production sector with a public utility mission (SONES). Taking into account the weight of the informal operators, it integrates three drinking water distribution sectors (private connection, standposts and carters). It distinguishes water intensive industries and services and non-water intensive industries and services. The last sector is non tradable services. There are four production factors in the economy: labour, capital, land and raw water. We chose to have eight households’ categories. They are defined according to their geographical location and according to the drinking water supply in their area: Dakar, other urban areas (ACU), the groundnut basin (BA), Niayes (NIAY), Casamance (CASA), the sylvo-pastoral area (ZSP), Eastern Senegal (SO), and the Delta River (FLEUV). Six rural households’ categories are distinguished according to agro-ecologic areas characteristics. Indeed, rural areas are characterized by strong disparities in terms of agro-climatic potential, infrastructures, cultivation 11 DPS : Direction de la Prévision et de la Statistique (Senegalese Direction of Statistics). 12 ESAM : Enquête Sénégalaise Auprès des Ménages (Senegalese Income Expenditure Household Survey).

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methods, intensity in the use of production factors, sources of household income (Cabral, 2005) and in terms of drinking water consumption structure. The other agents taken into account are firms, the Government and the Rest of the World. Tables presented in Appendix 1 make it possible to synthesize the main elements of the SAM structure at the reference period and to understand the changes of the variables of interest after the shock (a 30% drinking water demand increase, see below). In particular, the weight of each sector in the value added of the Senegalese economy, the share of the production factors in each sector, and the water intensity of the different sectors are important information to fully understand the results. The same holds for the structure of income and expenditure by household’s category. 2.3 The model Our Senegalese model is inspired by the neo-classical model EXTER, developed by Decaluwé, Martens and Savard (2001), but differs in many aspects. Firstly, our model accounts for four production factors (labour, capital, land and raw water) contrary to EXTER (labour and capital). Secondly, the capital is mobile between the different sectors while it is specific to each sector in EXTER. Thirdly, the household’s typology differs. The model integrates a Linear Expenditure System (LES) in which each commodity has a minimum consumption level (subsistence) whereas in EXTER, consumption is a fixed proportion of the available income. Finally, transfers within households and between households and the Rest of the World are explicitly taken into account. The model comprises seven equations blocks (Appendix 2): production, incomes and savings, taxes, demand, prices, external trade, and equilibrium conditions. Production The production is modelled at two levels. At the top level, a Leontief function of value added and total intermediate consumption defines the sector output. Then, the value added is represented by a Cobb-Douglas function of labour, capital, land and raw water for the irrigated rice sector; labour, capital and land for the other agricultural sectors; labour, capital and raw water for the drinking water production sector; labour and capital for all the other sectors except non-tradable services (only labour). The intermediate consumption of each sector is a fixed proportion of the production of each sector. The intermediate demand for a product is the sum of the intermediate consumptions of this product used by the different sectors. A linear function links the intermediate demand for a product to the intermediate consumption of a sector of the same product. The raw water, land, capital, and labour demands are derived from the first order conditions of the profit maximization of the Cobb-Douglas production for tradable services. For non-tradable services, the labour factor demand is the ratio between the value added and the income from labour factor to the unit. The total supply of labour, capital, land and raw water in the economy are exogenous and are set equal to the sum of the demands. Incomes and savings Each urban household earns his income from production factors: labour and capital. Each rural household earns his income from labour, capital and land. They also receive dividends (by firms), intra-household transfers, government transfers and foreign transfers. The households disposable incomes are derived by subtracting the direct taxes collected by the government. We specify saving and total consumption as fixed proportions of disposable income.

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For each sector, there is a representative firm which earns capital income. Its saving is the difference between its income, the direct taxes paid and the transfers paid to the other agents. Taxes The government receives direct taxes from households and firms, indirect taxes on domestic and imported goods, the remuneration of the raw water sale and transfers from the Rest of the World. The indirect taxes on imported goods are a function of the world import prices and the nominal exchange rate. The indirect taxes on domestic goods are a fixed proportion of the domestic supply. Demand Domestic consumption is determined by the Linear Expenditure System (LES) in which each good has a minimum consumption (subsistence) level. The public consumption is the nominal production of non-tradable services and the investment by origin is a fixed proportion of the total investment. Prices The value added price for each activity is equal to the ratio of the nominal production net of the intermediate consumptions to the value added volume. Domestic prices of imported and exported good depend on world prices of import and export, the nominal exchange rate and import taxes. The total demand (value) is the sum of demand for domestic good, all taxes included, and the imports, all taxes included. The total production (value) is equal to the sum of the demand for domestic goods and the exports of goods, evaluated at the export prices. The general prices index is the GDP deflator. Trade Domestic production is supplied to the domestic economy and the export market. We assume that there are simultaneous exports and imports at the sector level. However, external trade shall be structured such that imperfect substitution characterises the foreign markets. On the import side, the Armington (1969) approach is followed, thus supposing that domestic and imported goods are imperfect substitutes. For exports, the allocation of domestic output between exports and domestic sales is determined on the assumption that domestic producers maximise their profits subject to an imperfect substitution hypothesis. The composite production good is thus a constant elasticity of transformation (CET) aggregate of exports and domestic sales. Equilibrium conditions The current account balance is equal to the trade balance plus capital income received, plus exogenous transfer payments from firms and government to the Rest of the World less exogenous transfers from the Rest of the World to households and Government. The composite commodity is equal to the total domestic absorption of consumption demand, intermediate demand and investment demand. The supply of the production factors (labour, capital, land and raw water) is equal to the demand. The total investment is equal to the sum of total household saving, firms saving, government saving and foreign saving which corresponds to the neoclassical closure rule.

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Furthermore, the current account balance is exogenous (fixed at the reference period value). The nominal exchange rate is chosen as the numéraire. This choice is consistent with the West African Economic and Monetary Union agreements. Since Senegal has no impact on international markets the world prices are exogenous. The public expenditure is exogenous. The other exogenous variables of the model are the dividends, the labour, capital, land and raw water supply and the transfers. Finally, elasticities of the household’s consumption functions and elasticities of the import and export demands are taken from Decaluwé et alii (2001), and Cabral (2005). All other parameters come from the Senegalese SAM. The model is composed of 645 equations, 645 endogenous variables and 114 exogenous variables and parameters. The model is solved (calibration and simulations) using GAMS (Brooke, Kendrick and Meeraus, 1996). 3. Results of the scenario: the 30% increase of the water demand In Senegal, the water policy is designed on the assumption that the future water demand will increase by 30% (Ndaw, 2005; SDE, 2004; SONES, 2003; Management system consultants corp, 1998). This increase of the water demand is due to the demographic growth, the basic needs growth and new needs due to the Senegal economic and social development. As stated out by Cole (2004) and Luyanga, Miller, Stage (2006) the water intensity, i. e. the ratio between water consumption in physical units and the value of economic output, measured as gross output or as value added, rises sharply in the early phases of economic development. For a developing country like Senegal, this implies that per capita water consumption will certainly increase with economic development, so as sectoral water intensities. More evidence of what could become a stylized fact can be found in Briand, Nauges and Travers (2007). These authors use a treatment effect approach to measure accurately the increase in water use due to access to tap water, while controlling for differences in characteristics between connected and non-connected households. Illustration is made on a cross-section of households from Dakar, Senegal (Briand, 2006). The authors show that getting a tap connection induces an increase in water use of 334 litres per day per household, on average. Furthermore, the use of more intensive water technologies by agriculture and industrial sectors follows the network extension (see AQUASTAT13, FAO and SDE, 2004; Management system consultants corp, 1998). Then, in order to implement such an evolution in our computable general equilibrium framework, we suppose a 30% increase of the drinking water minima needs of the eight household categories. For the agricultural, industrial and services water demands, we suppose that the technical coefficients of water use grow of 30%. The results of the shock on the sectors evolution depend on the water intensity of each one of them (see Appendix 1, Table 3). Taking into account the households LES consumption function and the initial drinking water consumption structure (see Appendix 1, Table 5), we observe an increase in drinking water consumption via the private connections and the standposts but at a lower rate since the water price has increased. - Water consumption via the private connections increases slightly for the other urban households and Eastern Senegal (+1.4%) and Dakar (+2.1%). It increases more for the other rural areas (between +13.7% and +15.4%). - Water consumption via the standposts increases slightly for all the households, in response to the substitution effect between the private connections and the standposts.

13 www.fao.org/ag/agl/aglw/aquastat

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- The informal drinking water consumption decreases in response to the substitution effect between on the one hand, the private connection and the standpost and on the other hand, the informal one.

However, the effects are different according to household type. This is due to the initial water supply structure (share of the three water distribution segments) in each Senegalese area (see Table 5). The informal water consumption increases for the Niayes households and for the Fleuve (+0.02% and +0.9%). It decreases for the households of Casamance, the groundnut basin, other urban areas, sylvopastoral area and Dakar (between -2.1% and – 1.6%). It drops considerably for the households of Eastern Senegal (- 18.9%). The 30% rise of the use of the drinking water input by the different sectors of the economy generates an intermediate demands rise in the drinking water production sector (+67.9 %), in distribution via the private connection (+26.6 %) and, in distribution via the standpost (+25.2%). This is explained by the high water intensity of these sectors (see Appendix 1, Table 3). However, the intermediate demand for informal water distribution (used by the market gardening and fishing) drops (-3.8%) This result arises because of the substitution effect between formal and informal drinking water intermediate consumption. This final household consumption increase combined with that of the intermediate demands for water generates a large rise in the drinking water price for both producers and consumers. The price of drinking water by private connections (+35.7%) increases more than that of the standposts (+31.7%) and of the drinking water production (+30%). This rise reflects the pressure on the water resource. The producer prices evolution of the other goods and services is explained by the drinking water input weight in the total intermediate consumptions (see Appendix 1, Table 3). It is explained again by the intermediate consumptions weight in the production (see Appendix 1 Table 1) and by the three water prices evolution (private connections, public standposts and informal). The water user sectors (irrigated rice, market gardening, water intensive industry, water intensive tradable services) are affected (between +0.2% and +15.8%). Because their unit production cost depends on the water price, their intermediate consumption cost increase. The producer price of the other goods and services decreases because of the low weight of water input and the low weight of intermediate consumptions in the total production (value added weight, see Appendix 1.1). The combined rise of the household’s final consumption and the intermediate demands for drinking water generates a high increase in the water production sector. The water sectors expansion must make it possible to answer water demand evolution. We observe an increase in the drinking water production (+67.8%) and a rise in the drinking water distribution via the private connection (+41%). However, we note a large drop of the water distribution via the standpost (-18.5%) due to the substitution of standpost for private connection. This drop of the water distribution via the standpost is explained by the fact that the water supply which answers the water intermediate demand is the private connections. Lastly, the informal drinking water distribution sector declines by 3.4%. This means that the market gardening and fishing substitutes the private connections to the informal distribution thanks to the network expansion. The drinking water production and distribution (private connection) sectors expansion requires an increase in the production factors used (labour, capital and raw water). The capital and labour inflow (respectively of +142.9 % and +41%) in these two sectors and the raw water inflow (+13.1%) in the drinking water production sector is made possible by the perfect mobility of the production factors. The factors supply is exogenous (fixed). So, we observe a decrease in the

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factors quantities (labour, capital and raw water) used in the other sectors of the economy. And, we note a drop of their production (between -0.4 % and -15.5 % for irrigated rice). The production of the irrigated rice decreases because of a transfer from the raw water factor towards the drinking water production sector. Indeed, the raw water demand increases by +13.1% in this last sector while it declines of -45.8% in the irrigated rice sector. The domestic supply drop in the other sectors is consistent with the household final consumption drop which, taking into account their budgetary constraint, substitute water to other goods and services. Indeed, other goods and services final consumption decreases between -1.4 % and -3.5% for the households of Dakar, other urban areas, groundnut basin, Casamance and sylvopastoral area. For the households of Niayes, it decreases between -0.03% and -0.6%). It drops considerably for households of Eastern Senegal (between -19% and -29%). Lastly, it only increases very slightly for households of the Delta River (+0.3% and +1.3%). These evolutions are explained by two mechanisms. On the one hand, there is a price effect which generates a substitution effect between water and the other goods, more or less important according to the household type (income elasticity and Frisch parameters are different in LES consumption function). On the other hand, there is an income effect which explains the evolution in consumption volume. The decline of the others sectors supply (others than drinking water production and distribution via private connection), combined with a factors demand drop (labour, capital, and land) generates a factor remuneration decrease. The wage rate decreases of -1.7%, the rate of return to capital decreases of -1.6 % and, the rate of return to land decreases of -2.6%. But, the rate of return to raw water increases of +111.2% because the drinking water production sector is in expansion. This factors remuneration evolution (labour, capital, land and raw water) explains the income evolution of the different agents (households, firms and Government). Taking into account decrease in the price of the three factors (labour, capital and land), the gross income of the eight households categories decreases in equal proportions (-1%). But, the disposable income moves differently: it increases +0,8% and +1% for the households of Niayes and the Delta River while it decreases between -1% and -1.5% for the households of the groundnut basin, the sylvopastoral area, Dakar, other urban areas, Casamance and, in a more considerable proportion (-20.3%) for the households of Eastern Senegal. The saving of the households by category moves in similar proportions. Firms’ income decreases by -1.6% (because of the return of capital drop) and their saving decrease of -5.3 % (because the dividends paid are exogenous). The government income increases by +2.6%. This is explained by the rise of the income resulting from the raw water sale (rise in factorial remuneration) and by the rise of indirect receipts related to the drinking water sale. So, the government income increases despite of the indirect receipts decline (related to the sale of the others goods and services) and of the direct receipts on the firms and households income decline. Thus, the governmental saving increases by +11.7 % (because its expenditure is exogenous). So, the governmental saving increase is not enough to compensate for the households and firms saving drop: the total investment is slightly degraded -0.1%.

14

The total welfare in the economy, measured by the equivalent variation, decreases of -1.2% with contrasted evolutions according to households categories'14. Welfare remains nearly constant for households of Niayes and the Delta River. It decreases considerably (-11.8%) for the households of Eastern Senegal and more slightly (between -0.8% and -2.4%) for the other categories. As we point it out above, official studies have projected a 30% water demand increase in Senegal. To compare results and test the robustness of our CGE model, we have simulated an increase of 20% and 10% of the water demand. The variables move in the same direction and, as expected, magnitudes change. For example, the total welfare in the Senegalese economy decreases of -0.3% with a 10% increase of the water demand. It decreases of -0.7% with a 20% increase of the water demand. Conclusion In accordance with the forecasts of demand for 2020, the model enabled us to study the consequences of a 30% drinking water demand increase for Senegal. It shows that the feedback effects of the resource on the whole of the economic aggregates are significant. The drinking water sector expansion and the private connection network expansion make it possible to answer the rise of intermediate demands for water in the agriculture, industry and services. However, the household’s drinking water final consumption via the standposts increases more than that via the private connections, which indicates a still insufficient network. The standposts network develops sufficiently to decrease the informal water provision to the households, the market gardening and fishing. So, the formal modes of provision (private connections for the intermediate demands and standposts for final consumption) are substituted to the informal one. The development of the drinking water production and distribution network via the private connections monopolizes a significant amount of the production factors (labour, capital and raw water) to the detriment of the other sectors whose production drops. In particular, the irrigated rice sector suffers from the transfer of the raw resource towards the drinking water production sector. Moreover, the demand rise generates an increase in the water prices which weights on the water intensive sectors (irrigated rice, market gardening, water intensive industry, water intensive tradable services). Their unit cost of production is very affected and impacts on their production price. Thus, the consumption of these same goods and services decrease (substitution effect of the drinking water consumption to the other goods and services). Finally, the household’s welfare of Niayes and Delta River remain nearly constant. It drops considerably for the households of Eastern Senegal and more slightly for the other categories. The total welfare in the economy is degraded of -1.2% in spite of the expansion of the water sector.

14 Equivalent variation for household H (see Appendix for the variables definitions):

,

, ,

TR H

TRTR H TR HH H TR H TR

TR TRTR TR

PCOEV CTM PC C CTMO PCO CPC

γ⎛ ⎞ ⎛ ⎞ ⎛ ⎞= − − −⎜ ⎟ ⎜ ⎟ ⎜ ⎟

⎝ ⎠ ⎝ ⎠⎝ ⎠∑ ∑∏

15

Appendices Appendix 1: Table A1 .1: Share of value added in the production sectors

Production (XS) Value added (VA) Rate of value added Sectors Value (en millions de FCFA)

Part (%)

Value (en millions de FCFA)

Share (%)

VA / XS (%)

Irrigated rice 14620 0.32 6440 0.27 44.05 Rain rice 4168 0.09 1847 0.08 44.31 Market gardening 52054 1.13 44034 1.85 84.59 Fishing 73277 1.59 42166 1.77 57.54 Other agriculture 476902 10.35 372989 15.65 78.21 IIE15 506277 10.99 201808 8.47 39.86 INIE16 989654 21.48 247378 10.38 25 Other energy 55902 1.21 29937 1.26 53.55 Water production (SONES)

27659 0.60 19618 0.82 70.93

Water distribution by private connection (SDE)

43970 0.95 11351 0.48 25.82

Water distribution by standpost (SDE)

12311 0.27 4157 0.17 33.77

Informal water distribution

4894 0.11 4814 0.20 98.37

SMIE17 980868 21.29 598784 25.13 61.05 SMNIE18 1052146 22.84 628298 26.37 59.72 SNM19 311910 6.77 169076 7.10 54.21 Total 4606612 100 2382697 100 51.72 Source : SAM, 1996

Table A1.2: Share of production factors in value added (%) Share of factors Sectors VA (millions

de FCFA) Labour (%) Capital (%)

Land (%)

Raw water (%)

Total

Irrigated rice 6440 5 38 15 42 100 Rain rice 1847 57 31 12 0 100 Market gardening 44034 57 34 8 0 100 Fisching 42166 57 43 0 0 100 Other agriculture 372989 57 37 5 0 100 IIE 201808 22 78 0 0 100 INIE 247378 32 68 0 0 100 Other energy 29937 19 81 0 0 100 Water production (SONES) 19618 22 29 0 48 100 Water distribution by private connection (SDE)

11351 25 75 0 0 100

Water distribution by standpost (SDE)

4157 49 51 0 0 100

Informal water distribution 4814 82 18 0 0 100 SMIE 598784 44 56 0 0 100 SMNIE 628298 23 77 0 0 100 SNM 169076 100 0 0 0 100 Total 2382697 41 57 1 1 100 Source : SAM, 1996

15 IIE: Water-intensive industry. 16 INIE: Non-water intensive industry. 17 SMIE: Water-intensive tradable services. 18 SMNIE: Non-water intensive tradable services. 19 SNM: Non-tradable services.

16

Table A1.3: Water intensity by sectors Sectors Water

producted input (million FCFA)

Water from private connections input (million FCFA)

Water from standposts input (million FCFA)

Informal water input (million FCFA)

Total input of the sector (million FCFA)

Water input / Total input (%)

Irrigated rice 0 0 0 0 8180 0 Rain rice 0 0 0 0 2321 0 Market gardening 0 1771 443 443 8020 33 Fishing 0 222 0 44 31111 0.8 Other agriculture 0 0 0 0 103913 0 IIE 0 10380 0 0 304469 3.4 INIE 0 10380 0 0 742276 1.4 Other energy 0 791 0 0 25965 3 Water production (SONES)

0 0 0 0 8041 0

Water distribution (private connections (SDE))

22969 0 0 0 32619 70.4

Water distribution (standposts (SDE))

5742 0 0 0 8154 70.4

Informal water distribution

0 0 80 0 80 100

SMIE 0 10051 0 0 382084 2.6 SMNIE 0 4459 0 0 423848 1 SNM 0 2040 0 0 142834 1.4 Total 28711 40094 523 487 2223915 3.1 Source : SAM, 1996

Table A1.4: Households income by source (en %)

Dakar ACU BA NIAY CASA ZSP SO FLEUV Factors Labour 35.8 30.5 12.2 39.5 21.8 14.8 58.4 17.4 Capital 29.5 36 38.5 26.9 35.2 30.8 14.5 39.5 Land 0 0 4.7 2.9 4.8 2.5 2.1 3.7 Transfers Households 27..2 25 28 18.4 24.4 38.8 19.2 28.7 Firms 5 4 6.8 5 5.5 4.5 2.2 4.2 Government 0.5 1.1 0.1 0.2 0.5 2.2 0.5 0.5 Rest of the world

2 3.4 9.7 7.1 7.8 6.4 3.1 6

Total 100 100 100 100 100 100 100 100 Source : SAM, 1996

17

Table A1.5: Household expenses (percentages) Dakar ACU BA NIAY CASA ZSP SO FLEUV

Total income

100 100 100 100 100 100 100 100

Households transfers

16.3 24 3.75 240 28.5 26.7 93.1 205

Direct taxation

2.2 2.5 1.75 1.3 1.4 1.2 0.6 1.1

Final consumption

39.5 45.8 122.5 96.7 100.3 110.5 57 110.7

Irrigated rice 10 11 11 16 16 11 13 12 Rain rice 0 0 0.08 0 2 0 1.8 0 Market gardening

5 5 6 6 5 5 5 4.5

Fishing 5 5 4 5 4 3 5.7 3.2 Other agriculture

9 9 25 14 23 14 14 26.8

IIE 17 15 15 16 13 17 16 16.3 INIE 22 21 20 22 18 23 22 21.8 Other energy 2 2 2 2 1 2 1.7 1.7 Water production (SONES)

0 0 0 0 0 0 0 0

Water distribution (private connections (SDE))

3 1 2 1 1 2 1 0.23

Water distribution (standposts (SDE))

0.05 0.05 0.16 0.28 0.01 0.24 0.05 0.01

Informal water distribution

1 0.14 0.38 0.29 0.15 0.48 0.2 0.05

SMIE 6 7 4 4 3 5 4 3 SMNIE 20.95 23.81 10.38 12.43 12.84 17.28 15.55 10.41 SNM 0 0 0 0 0 0 0 0 Saving 42 27.7 -28 -238 -30.2 -38.4 -50.7 -216.8 Source : SAM, 1996 Appendix 2: Model equations Number of equations Production (1) 1NWAT NWAT

NWAT NWAT NWAT NWATVA A LD KDα α−⎡ ⎤= ⎣ ⎦ 9 (2) 1NIRG NIRG NIRG NIRG

NIRG NIRG NIRG NIRG NIRGVA A LD KD TDα β α β− −= 3 (3) 1WAT WAT WAT WAT

WAT WAT WAT WAT WATVA A LD KD EDα β α β− −= 1 (4) 1IRG IRG IRG IRG IRG IRG

IRG IRG IRG IRG IRG IRGVA A LD KD TD EDα β χ α β χ− − −= 1 (5) NTR NTRVA LD= 1

18

(6) ( ) /NWAT NWAT NWAT NWATLD PV VA wα= 9 (7) ( ) /NIRG NIRG NIRG NIRGLD PV VA wα= 3 (8) ( ) /WAT WAT WAT WATLD PV VA wα= 1

(9) ( ) /IRG IRG IRG IRGLD PV VA wα= 1

(10) ,NTR NTR NTR TR NTR TRTR

LD P XS DI Pc⎛ ⎞= −⎜ ⎟⎝ ⎠

∑ /w 1

(11) ( )(1 ) /NWAT NWAT NWAT NWATKD PV VA rα= − 9 (12) ( ) /NIRG NIRG NIRG NIRGKD PV VA rβ= 3 (13) ( ) /WAT WAT WAT WATKD PV VA rβ= 1 (14) ( ) /IRG IRG IRG IRGKD PV VA rβ= 1 (15) ( )(1 ) /NIRG NIRG NIRG NIRG NIRG TTD PV VA rα β= − − 3 (16) ( ) /IRG IRG IRG IRG TTD PV VA rχ= 1 (17) ( )( )1 /WAT WAT WAT WAT WAT EED PV VA rα β= − − 1 (18) ( )( )1 /IRG IRG IRG IRG IRG IRG EED PV VA rα β χ= − − − 1

(19) j

jj v

VAXS = 15

(20) jjj XSioCI = 15 (21) jtrjtrj CIaijDI = 210 Income and savings (22)

,H H HH w j r TR l T AGR H H H H Hj TR AGR H

YM w LD rKD r TD RTF DIV TGM TWMλ λ λ= + + + + + +∑ ∑ ∑ ∑ 8 (23) ,H H H H H

HYDM YM TDM RTF= − −∑ 8

(24) re TRTR

YE r KDλ= ∑ 1

19

(25) H H HSM YDMφ= 8 (26) H

HSE YE DIV TDE TEW= − − −∑ 1

(27) ( )WAT PE E RI E TRX TR HTRX TR H

YG ED r ED r TIM TI TDM TDE TWGλ= + + + + + +∑ ∑ ∑ 1

(28) H

HSG YG G TGM TGW= − − −∑ 1

Taxes (29) ( ) (1 )TRX TRX TRX TRX TRX TRX TRX TRX TRX TRXTI tx P XS Pe EX tx tm ePwm M= − + + 8 (30) NTRX NTRX NTRX NTRXTI tx P XS= 6 (31) H H HTDM ty YM= 8 (32) YEtyTDE e= 1 (33) TRX TRX TRX TRXTIM tm Pwm eM= 8 Demand (34) H H HCTM YDM SM= − 8

(35) , , ,

,

( )TR TR H TR H H TR TR HTR

TR HTR

Pc C CTM Pc CC

Pc

γ+ −=

∑ 112

(36) TRTR

TR

ITINVPcµ

= 14

(37) ,TR TR j jj

DIT aij CI=∑ 14

International trade

(38) 1

(1 )e e e

TRX TRX TRXe e eTRX TRX TRX TRX TRX TRXXS B EX Dκ κ κβ β

−− −⎡ ⎤= + −⎣ ⎦ 8

(39) NTRX NTRXXS D= 6

(40) 1e

TReTRX TRX

TRX TRXeTRX TRX

PeD EXPl

τβ

β⎡ ⎤⎛ ⎞⎛ ⎞−

= ⎢ ⎥⎜ ⎟⎜ ⎟⎝ ⎠⎝ ⎠⎣ ⎦

8

(41) 1

(1 )m m m

TRX TRX TRXm m mTRX TRX TRX TRX TRX TRXQ A M Dρ ρ ρα α

−− −⎡ ⎤= + −⎣ ⎦ 8

(42) NTRX NTRXQ D= 6

(43) 1

mTRXm

TRX TRXTRX TRXm

TRX TRX

PdM DPm

σαα

⎡ ⎤⎛ ⎞⎛ ⎞= ⎢ ⎥⎜ ⎟⎜ ⎟−⎝ ⎠⎝ ⎠⎣ ⎦

8

20

(44) TRX TRX row TR TRX TRX

TRX TR TRX

HH

SR e Pwm M r KD TEW TGW e Pwe EX

TWM TWG

λ= + + + −

− −

∑ ∑ ∑

∑ 1

Prices

(45) , /j j j TR j TR jTR

PV P XS DI Pc VA⎛ ⎞= −⎜ ⎟⎝ ⎠

∑ 15

(46) (1 )(1 )TRX TRX TRX TRXPm ePwm tm tx= + + 8 (47) TRX TRXPe ePwe= 8

(48) TRX TRX TRX TRXTRX

TRX

Pc Q Pm MPdD−

= 8

(49) NTRX NTRXNTRX

NTRX

Pc QPdD

= 6

(50) (1 )

TRTR

TR

PdPltx

=+

14

(51) TRX TRX TRX TRXTRX

TRX

Pl D Pe EXPXS+

= 8

(52) NTRX NTRXNTRX

NTRX

Pl DPXS

= 6

(53) jj

jindex PVP δ∑= 1

Equilibrium (54) ,good good good H good

HQ DIT C INV= + +∑ 12

(55) ,SMNIE SMNIE H SMNIE SMNIEH

Q C DIT INV= + +∑ 1

(56) ∑=j

jLDLS 1

(57) TRTR

KS KD=∑ 1

(58) AGR

AGRTS TD= ∑ 1

(59) PE RIES ED ED= + 1 (60) H

HIT SM SE SG SR= + + +∑ 1

(61) SNM SNMG P XS= 1 Total number of equations: 635

21

Appendix 3: Endogenous variables Number of variables

,TR HC : Household H’s consumption of good TR (volume) 112

HCTM : Household H’s total consumption (value) 8

jCI : Total intermediate consumption of activity J (volume) 15

,TR jDI : Intermediate consumption of good TR in activity J 210

TRDIT : Intermediate demand for good TR (volume) 14

TRINV : Investment demand for good TR (volume) 14 IT : Total investment 1

ILD : Activity j demand for labour (volume) 15 :TRKD Activity TR demand for capital (volume) 14

AGRTD : Agricultural activity AGR demand for land (volume) 4

WATED : Activity WAT demand for raw water (volume) 1

IRGED : Activity IRG demand for raw water (volume) 1

iP : Producer price of good I 15

TRPd : Domestic price of good TR including taxes 14

TRPc : Consumer price of composite good TR 14

iPV : Value added price for activity J 15

TRXPe : Domestic price of exported good TRX 8

TRXPm : Domestic price of imported good TRX 8

TRPl : Domestic price of good TR (excluding taxes) 14

indexP : GDP deflator 1 r : Rate of return to capital 1 w : Wage rate 1 Tr : Rate of return to agricultural land 1

Er : Rate of return to raw water 1 SE : Firms’ savings 1 SG : Government’s savings 1

HSM : Household H’s savings 8 TDE : Receipts from direct taxation on firms’ income 1

HTDM : Receipts from direct taxation on household H’s income 8

TRTI : Receipts from indirect tax on TR 14

TRXTIM : Receipts from import duties TRX 8

IVA : Value added for activity J (volume) 15

jXS : Output of activity J (volume) 15

HYDM : Household H’s disposable income 8 YE : Firms’s income 1 YG : Government’s income 1

HYM : Household H’s income 8

TRXEX : Exports in good TRX (volume) 8

22

TRXM : Imports in good TRX (volume) 8

trD : Demand for domestic good TR (volume) 14

trQ : Demand for composite good TR (volume) 14 Total number of endogenous variables: 635 Appendix 4: Exogenous variables

HDIV : Dividends paid to households H G : Public consumption (value) LS : Total supply of labour KS : Total supply of capital TS : Total supply of land ES : Total supply of raw water

HTGM : Public transfers to household H TGW : Public transfers to the rest of the world

,H HRTF : Household H’s transfers to household H’s

HTWM : Rest of the world transfers to household H’s TWG : Rest of the world transfers to government TEW : Dividends paid to the Rest of the world

TRXPwm : World price of import TRX

TRXPwe : World price of export TRX SR : Current account balance e : Nominal exchange rate Appendix 5: Parameters Production functions

mTRXA : Scale coefficient (CES function between imports and domestic production)

mTRXα : Share parameter (CES function between imports and domestic production)

mTRXσ : Substitution elasticity (CES function between imports and domestic production)

mTRXρ : Substitution parameter (CES function between imports and domestic production)

eTRXB : Scale coefficient (CET function between domestic production and exports)

eTRXβ : Share parameter (CET function between domestic production and exports)

TRβ : Share of labour factor in Cobb-Douglas function of value added production

IRGχ : Share of raw water factor in Cobb-Douglas function of value added production e

TRXτ : Transformation elasticity (CET function between domestic production and exports) e

TRXκ : Transformation parameter (CET function between domestic production and exports)

,TR jaij : Input-output coefficient

IA : Scale coefficient (Cobb-Douglas production function)

Iα : Elasticity (Cobb-Douglas production function)

jio : Technical coefficient (Leontief production function)

jv : Technical coefficent (Leontief production function)

23

Tax rates

TRtx : Tax rate on good TR

TRXtm : Import duties on good TR

Hty : Direct tax rate on household H’s income

ety : Direct tax rate on firms’ income Other parameters

,TR HC : Household H’s minimum consumption of good TR ,TR Hγ : Marginal share of good TR

Hwλ : Share of labour income received by household H

Hrλ : Share of capital income received by household H

Hlλ : Share of land income received by household H

WATλ : Share of raw water income received by government

reλ : Share of capital income received by firms

rowλ : Share of capital income received by foreigners

Hφ : Propensity to save

TRµ : Share of the value of good TR in total investment

jδ : Share of activity J in total value added Appendix 6: Sets

{ }, , , , , , , , , , , , , , ,i j I RI RP MA PEC AA IIE INIE EG PE BP BF DIE SMIE SMNIE SNM∈ = All activities and goods ( RI : Irrigated rice, RP : Rain rice, MA : Market gardening, PEC : Fishing, AA : Other agriculture, IIE : Water intensive industry, INIE : Non-Water intensive industry, EG : Other energy, PE : Drinking water production (SONES), BP : Drinking water distribution via the private connection (SDE), BF : Drinking water distribution via the standpost (SDE), DIE : Informal drinking water distribution, SMIE : Water intensive tradable services, SMNIE : Non-Water intensive non-tradable services, SNM : Non-tradable services ).

{ }, , , , , , , , , , , , ,TR I RI RP MA PEC AA IIE INIE EG PE BP BF DIE SMIE SMNIE∈ = Tradable activities and goods

{ }, , , , , , , , , , ,Good TR RI RP MA PEC AA IIE INIE EG PE BP BF DIE∈ = Tradable goods

{ }, , , , , , , , ,NAG TR PEC IIE INIE EG PE BP BF DIE SMIE SMNIE∈ = Non-agricultural tradable activities and goods

{ }, , ,AGR TR RI RP MA AA∈ = Agricultural activities and goods

{ }IRG AGR RI∈ = Irrigated activity and good

{ }, ,NIRG AGR RP MA AA∈ = Non-irrigated agricultural activities and goods

{ }WAT NAG PE∈ = Non agricultural activity and good using raw water as input

24

{ }, , , , , , , ,NWAT NAG PEC IIE INIE EG BP BF DIE SMIE SMNIE∈ = Non-agricultural activities and goods not using raw water as input

{ }, , , , , , ,TRX TR RI MA PEC AA IIE INIE SMIE SMNIE∈ = Importable and exportable activities and goods

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